- The Swiss National Bank lowered interest rates on Thursday.
- The Bank of England kept rates at 5.25% after inflation data the previous day revealed a drop to 2%.
- BoE policymakers said their decision not to cut rates was a finely balanced one.
The GBP/USD outlook remains bearish, with the dollar at a five-week high against the pound. This trend is due to the widening divergence in policy between the Federal Reserve and other major central banks. Namely, the Bank of England kept interest rates on hold on Thursday, but signaled a threatening reduction in interest rates. At the same time, the Swiss National Bank cut rates for the second time.
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The dollar was strong on Friday as it became more apparent that the Fed has taken a more hawkish stance than most other major central banks. Namely, the Swiss National Bank reduced rates for the second time. Meanwhile, although the Bank of England kept rates on hold, policymakers said their decision not to cut rates was a finely balanced one.
On the other hand, the Fed predicted just one rate cut for 2024, noting that the economy remains strong. Policymakers remained cautious despite softer inflation.
The Bank of England kept rates at 5.25% on Thursday after inflation data the previous day revealed a drop to 2%. However, policymakers are concerned about core inflation, which remains strong. As a result, Governor Andrew Bailey said it was too soon to cut rates.
However, economists expect the first rate cut in August, and market participants in September or November. All of these dates would be before the Fed tapering in December. Therefore, most major central banks will cut rates long before the US central bank raises the dollar.
GBP/USD key events today
- US manufacturing PMI
- US flash services PMI
GBP/USD Technical Outlook: New low confirms downtrend
From the technical side, GBP/USD the price further fell to a new low below the key level of 1.2700. This has strengthened the bearish bias as the price is now well below the 30-SMA. At the same time, the RSI is near the oversold region, showing solid bearish momentum.
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Therefore, the decline is likely to continue until the next barrier at 1.2600. Here, price could pause for a pullback before the bears look for lower lows. The bearish trend will continue if the price continues, making lower and lower lows.
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