- BoE policymakers have accepted the view that UK inflation is falling towards the central bank’s target.
- The US economy is still far stronger than other major economies.
- The recent US jobs report raised expectations for a Fed rate cut in September.
The GBP/USD forecast paints a more bearish picture as investors gain confidence that the Bank of England will implement two rate cuts this year. At the same time, the dollar regained momentum as the effects of the poor jobs report wore off.
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The Bank of England will meet on Thursday, and economists expect policymakers to keep interest rates on hold. However, the focus will be on clues for future political moves. BoE policymakers have accepted the view that UK inflation is falling towards the central bank’s target.
As a result, investors are fully pricing in two 25 basis point rate cuts this year. Moreover, analysts expect the first reduction already in June. This would put the pound in a weaker position against the dollar as the Fed could implement its first rate cut in September.
Although the recent US jobs report raised expectations for a Fed rate cut, the US economy remains far more robust than other major economies. The employment figures gave the Fed a momentary relief. However, after the news trickled in, it became clear that policymakers would need more than one downbeat report to determine the timing of the first rate cut. As a result, the dollar rebounded, gaining against most major currencies on Wednesday.
GBP/USD key events today
No major impact reports coming out of the UK or USA today. As a result, investors will continue to speculate ahead of the BoE meeting.
GBP/USD Technical Forecast: Decline pauses at key Fib retracement level
On the technical side, the GBP/USD price is in a sharp decline which is paused at the 0.5 Fib retracement level. Bias switched from bullish to bearish when price broke below its support trendline and 30-SMA. At the same time, the RSI fell below 50 into bearish territory.
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If the bearish momentum remains strong, the price will soon break below the Fib level and aim for support at 1.2301. On the other hand, if the Fib level remains firm, the price will jump higher to retest the recently broken SMA before continuing down.
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