- Fed policymakers are poised to begin reducing borrowing costs.
- Investors have increased the likelihood of a 50 bps Fed rate cut.
- The Central Bank of Great Britain will not rush to cut interest rates.
The GBP/USD forecast is bullish as the pound hovers near a two-and-a-half-year high against the dollar following the Jackson Hole Symposium. In particular, Powell said it’s time for the Fed to start cutting rates. On the other hand, the BoE’s Bailey said it was too early to declare victory against inflation.
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The dollar fell on Friday after Powell signaled a rate cut in September. The Fed must balance inflation with growth. Therefore, with inflation on a steady downward trend and growth slowing, policymakers are ready to start reducing borrowing costs. In particular, the Fed is interested in the labor market, which has begun to crack. Powell noted that it is time for the central bank to adjust policy.
Investors raised the likelihood of a super-major rate cut of 50 basis points, while a smaller cut fell to 65%. If data ahead of the September meeting meet expectations, the Fed is likely to cut by 25 basis points. On the other hand, if the data misses forecasts, the probability of a 50 bps cut will increase.
Meanwhile, Bank of England Governor Bailey struck a different tone. He said the UK central bank would not rush to cut interest rates because it was too early to declare victory over inflation. Consequently, sterling strengthened. At the same time, data from Great Britain revealed a better-than-expected economic recovery. On Friday, business confidence was near a three-year high, further supporting the pound.
GBP/USD key events today
There will be no key economic announcements from the US or UK today. Accordingly, the pair could consolidate.
GBP/USD Technical Forecast: Bulls make new highs despite stalled momentum
From the technical side, GBP/USD the price made a new high above the 1.3150 resistance level. It is trading well above the 30-SMA and the RSI remains in the overbought region. However, the RSI failed to make higher highs, indicating that the bullish momentum has stalled despite the higher prices.
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If this continues, the price is likely to reach the next hurdle at the 1.3301 level. At the same time, the bears could gain momentum and initiate a pullback to the 1.3150 or 30-SMA level before the bullish trend resumes.
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