- Pound bulls cheered the Labor party’s victory last Thursday.
- The UK’s new Chancellor of the Exchequer, Rachel Reeves, will speak on Monday.
- The US will release consumer and producer inflation data this week.
The GBP/USD outlook is bullish as the pound extends its rally after the Labor Party won last week’s UK election. Meanwhile, the dollar remains weak ahead of inflation and after the US non-farm payrolls report showed weaker demand in the labor market.
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Pound bulls cheered last Thursday’s Labor Party victory on a brighter outlook for the UK economy. The new Chancellor of the Exchequer, Rachel Reeves, will speak on Monday and could reveal plans to improve economic growth in the UK. Moreover, the end of the elections brought relief as it removed the cloud of political uncertainty in the country.
The pound continues to be the best performer against the dollar this year among major currencies. There is a 63% chance the Bank of England will cut rates at its August meeting. Significantly, UK inflation has eased while the economy remains solid. Investors will now turn their attention to BoE policymakers who have been silent since the election was called. The first speaker on Monday will be MPC member Jonathan Haskell.
On the other hand, the US will release consumer and producer inflation data this week. Economists expect the annual figure to decrease from 3.3% to 3.1%. If that happens, market participants will increase the likelihood of a Fed tapering in September.
There is currently a 76% chance of a cut in September. This came after employment data on Friday showed an unexpected increase in the unemployment rate. At the same time, average hourly wages decreased. A slowing economy accompanied by softer inflation could prompt the Fed to cut borrowing costs soon.
GBP/USD key events today
There are no key events scheduled in the UK or US today, so the pair could consolidate.
GBP/USD Technical Outlook: Bulls expect resistance at 1.2850 in a solid rally
On the technical side, the GBP/USD price is on a strong bullish rally that broke the resistance level at 1.2800. Moreover, the price is well above the 30-SMA, showing a bullish trend. Meanwhile, the RSI, which is trading above 70 in overbought territory, is supporting solid bullish momentum.
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The next barrier is at the level of 1.2850. After such a steep rise, the price could stop here. A break or pullback would allow the 30-SMA to catch up before the trend resumes.
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