- The dollar is headed for a second quarter of growth as expectations for a Fed rate cut fall.
- Market participants will pay close attention to the PCE Price Index report.
- US GDP rose from 1.3% to 1.4%, as expected.
The GBP/USD outlook remains bearish, even with a slight recovery, as investors eagerly await the US PCE price index report. At the same time, the dollar was steady after rising on data showing continued strength in the US economy.
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The dollar is headed for a second quarter of growth as expectations for a Fed rate cut fall. Markets have had to adjust expectations for rate cuts since the start of the year. Currently, investors expect two cuts for the year. However, the Fed has a less dovish outlook, forecasting just one rate cut.
Accordingly, market participants will pay close attention to the PCE price index report later in the day. Economists expect inflation to soften to an annual rate of 2.6% in May. If the numbers match these estimates, Fed rate cut expectations will increase. On the other hand, a higher-than-expected number would dampen expectations of a rate cut.
Moreover, the dollar got a boost from the previous session’s data. GDP rose from 1.3% to 1.4%, as expected. Meanwhile, jobless claims fell from 239,000 to 233,000, showing continued strength in the US labor market.
On Thursday, a former MPC member said the Bank of England could cut rates in August. However, that would depend on inflation and wage data aligning with the MPC’s forecasts. Last week, the central bank kept rates on hold despite inflation reaching its 2% target. Policymakers are waiting for weaker wage data before starting a rate-cutting cycle.
GBP/USD key events today
- Core US price index PCE m/m
GBP/USD Technical Outlook: Downtrend approaching 1.2600 support
On the technical side, the GBP/USD price is trading below the 30-SMA with the RSI below 50, indicating a bearish trend. Furthermore, the price makes lower highs and lows, which indicates a developed downtrend.
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Currently, the price is trading with the nearest support at 1.2600 and the nearest resistance at 1.2700. Furthermore, the decline has been halted and the bulls are challenging the 30-SMA resistance. A break above the SMA would allow the price to retest resistance at 1.2700. However, if the SMA remains firm, the price will continue the downtrend with the next target at 1.2600.
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