- Markets are fully pricing in two BoE rate cuts until December.
- Data on Thursday revealed a stronger-than-expected expansion in the US economy.
- All eyes are on the core US PCE report.
GBP/USD price analysis highlights bearish trend despite slight recovery ahead of US inflation data. The pound fell as investors raised expectations for a rate cut by the Bank of England in the previous session. At the same time, the dollar was steady amid signs that the US economy remains resilient.
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This week the Bank of England and the Fed raised their expectations for interest rate cuts. The US central bank’s policy outlook significantly affects other major central banks. Most of them have long been cautious as US inflation has remained high.
Moreover, a departure from Fed policy would mean a weaker currency. Therefore, policymakers prefer to let the Fed lead the way. Although rates started to fall in Canada and the Eurozone, there was caution over the Fed’s more hawkish tone.
However, recent US inflation data raised expectations for a cut in September. As a result, investors are more confident that BoE policymakers will cut rates this year. Notably, markets are fully pricing in two BoE rate cuts until December. Meanwhile, there is a 50% chance of a cut next week.
Elsewhere, the dollar got a boost after Thursday’s data revealed a stronger-than-expected expansion in the US economy. GDP grew by 2.8% in the second quarter, well above estimates for a 2.0% expansion. However, the report also revealed softer inflation, keeping bets on a September Fed tapering intact. All eyes are now on the core PCE report, which could show an increase from 0.1% to 0.2%.
GBP/USD key events today
- Core US price index PCE m/m
GBP/USD technical price analysis: The price is hovering near the 30-SMA in a shallow bearish trend
On the technical side, the GBP/USD price is in a shallow bearish trend near the 30-SMA. Meanwhile, the RSI is trading in bearish territory but not reaching the oversold region. This is a sign that the bears are holding back or that the bulls are preventing strong bear swings.
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This slow trend could continue to the support level of 1.2800. However, the bulls could take control with a break above the 30-SMA if the bears fail to gain momentum. Accordingly, the price would get an opportunity to revisit the key level of 1.3050.
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