- UK retail sales rose 0.5% in July after falling 0.9% the previous month.
- UK GDP data reveals expected growth of 0.6% in Q2.
- All the focus will be on Powell’s speech at the symposium in Jackson Hole.
The GBP/USD outlook is bullish as the pound rises amid falling expectations of a BoE rate cut. On the other hand, the dollar remained weak as investors fully paid for the Fed’s 25 basis point rate cut in September.
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The pound has been on the rise since last week when data showed the UK economy was holding steady. Notably, UK retail sales rose 0.5% in July after falling 0.9% the previous month. The sales data came after GDP data revealed an expected 0.6% growth in Q2.
A stable economy has reduced the chances that the Bank of England will implement another rate cut soon. The probability of a rate cut in September fell to 37%. At the same time, investors expect a 43 basis point cut in 2024. As expectations for a BoE rate cut fall, markets are fully pricing in a Fed tapering in September.
The tide turned last week after data showed a modest increase in inflation, as expected. Although the odds of a 50 bps cut have fallen, traders have increased their bets on a smaller rate cut. Fed policymakers are more confident that inflation will reach the 2% target. Therefore, investors believe that in September they will start to support the first reduction.
Accordingly, all focus will be on the Jackson Hole Symposium, where Powell will speak. More dovish talk will further weigh on the dollar and boost the pound. At the same time, the FOMC’s policy minutes may contain clues about policymakers’ views on rate cuts.
GBP/USD key events today
There are no key reports scheduled for today. As a result, the pound is likely to extend last week’s move.
GBP/USD technical outlook: Bulls target 1.3000 level
From the technical side, GBP/USD price is on a steep, bullish move well above the 30-SMA. At the same time, the RSI climbed into the overbought region, showing an increase in bullish momentum.
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The rally pushed the price above solid resistance consisting of the 1.2900 level and the 0.618 Fib. If this move continues, the price will reach the key psychological level of 1.3000. However, if the bulls are exhausted before then, GBP/USD could pull back to retest the 30-SMA support before climbing.
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