- Trump’s policies are likely to boost economic growth and inflation.
- The Fed may be forced to keep rates at a restrictive level for longer.
- The UK economy shrank unexpectedly.
The weekly GBP/USD forecast is gloomy as the pound falls against a strong dollar amid Trump’s trade on weaker UK GDP.
GBP/USD Ups and Downs
The GBP/USD pair had a very bad week as the Trump trade boosted the dollar and weighed on the pound. Despite various economic reports from the UK and US, markets were focused on the upcoming policy change in the US.
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Trump’s policies are likely to boost economic growth and inflation. Therefore, the Fed could be forced to keep rates at a restrictive level for longer. High interest rates boost Treasury yields and the dollar.
Meanwhile, US inflation data was in line with expectations, leaving bets on a rate cut largely unchanged. However, Powell’s remarks that there was no rush to cut rates reduced bets to below 50%. On the other hand, the UK economy unexpectedly fell, further weighing on the pound.
Next week’s key events for GBP/USD
Next week, market participants will focus on key economic reports from the UK, including consumer inflation, retail sales and business activity. Inflation in the UK recently fell below the Bank of England’s target to reach 1.7%. The downturn was initially a big motivator for the central bank to reduce borrowing costs.
However, policymakers remain cautious, noting that the economy could perform better than expected over the medium term. Therefore, inflation could recover. A better-than-expected CPI reading will dampen expectations of a rate cut and boost the pound. Meanwhile, a bad report will affect the currency.
GBP/USD Weekly Technical Forecast: The decline could be stopped at 1.2600
From the technical side, GBP/USD the price fell to the support level of 1.2600. The new momentum has put the price well below the 22-SMA, showing that the bears are in the lead. At the same time, the RSI reached the oversold region, indicating solid bearish momentum.
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This week, the GBP/USD price made only bearish candles, showing a strong bias. The decline started after the price broke below and retested the key level of 1.3002. At the same time, the price retested the 22-SMA as resistance. It bounced lower, breaking through support at 1.2801 before stalling at the 1.2600 level. However, after such a steep decline, the price may need a break next week before continuing its decline.
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