- Solid economic indicators confirmed the strength of the US economy.
- There has been an increase in business activity in the service sector in the US.
- Powell said the rate cut would be delayed until there were clear signs that inflation was coming down.
In the GBP/USD outlook, the narrative is unfolding in a bearish tone. Buoyed by positive data, the dollar’s jump overshadowed the pound. Monday witnessed a steady decline in the value of the pound as strong economic indicators confirmed the strength of the US economy.
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Recent data from the US, including Friday’s jobs report, has led to a drop in expectations for an early rate cut in the US. As a result, the dollar surged, putting pressure on the pound.
The fall in the currency finally pushed him out of the consolidation. Therefore, if the dollar’s rise continues, this could trigger a bear market for the pair. Initially, the pound strengthened as investors anticipated earlier interest rate cuts in the US compared to the UK. However, that narrative has changed as the US plans to delay rate cuts.
Data from the US showed an increase in business activity in the services sector on Monday. Notably, the ISM non-manufacturing PMI recorded another month of expansion.
Moreover, on Sunday, Powell said that a rate cut would be delayed until there were clear indications that inflation would fall to the 2 percent target. These remarks contributed to the rise in the dollar and treasury yields.
In the UK, the Bank of England kept interest rates on hold last week. However, policymakers have signaled the possibility of rate cuts if inflation falls as expected.
GBP/USD key events today
Traders are not expecting major economic reports from the UK or the US today. Therefore, they will continue to digest recent reports.
GBP/USD Technical Outlook: Solid bearish momentum ends price consolidation
On the technical side, the pound fell from the key resistance level of 1.2760 to the fib extension level of 1.414. The decline saw the price break below the key support level of 1.2600, indicating solid bearish momentum.
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For a long time, the price traded between the resistance level of 1.2760 and the support at 1.2600. Therefore, solid bearish momentum finally pushed the price out of this consolidation area. Moreover, this could be the beginning of a bearish trend. Currently, the price is paused at the 1.414 fib level and could pull back to retest the 1.2600 level before the downtrend resumes.
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