- UK inflation fell from 3.2% to 2.3% in April.
- There is a 50% chance that the BoE will cut rates in June.
- Investors are waiting for the minutes from the FOMC meeting.
GBP/USD price analysis shows increased bullish momentum as the pound rises with a smaller-than-expected drop in inflation. Meanwhile, investors eagerly awaited the minutes from the FOMC policy meeting.
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On Wednesday, data from Great Britain revealed a sharp drop in headline inflation from 3.2% to 2.3% due to lower household energy prices. However, economists had expected a more significant drop to 2.1%, just above the Bank of England’s target. Therefore, there was a slight decline in rate cut expectations.
Earlier, markets were pricing in a 55% chance that the BoE would implement its first rate cut in June. After the report, this figure fell to 50% and the pound strengthened. Moreover, a closer look at the inflation report revealed a stronger-than-expected rise in services inflation, complicating the outlook for a BoE rate cut.
Meanwhile, the dollar held steady as policymakers played down expectations of a Fed rate cut. The recent drop in inflation has caused a lot of market excitement around US interest rates. However, calm returned as policymakers maintained a cautious tone. Most of them cautioned that it is too early to conclude that the downward trend in price growth has returned. However, there is now more confidence that the Fed’s next move will be a rate cut. The only uncertainty is the timing of the first cut. Minutes from the FOMC meeting later today could provide more clues about this outlook.
GBP/USD key events today
GBP/USD technical price analysis: Price is becoming overbought below 1.2750
On the technical side, the GBP/USD price made a sharp, bullish move to the resistance level at 1.2750. At the same time, the price reached the Fib extension level of 1,618, showing that the bullish bias is strong. It is currently above the 30-SMA with the RSI in the overbought region, indicating that the bulls have pushed the price to the limit.
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Therefore, the uptrend could stall due to strong resistance above. Furthermore, the RSI is showing some weakness in the recent uptrend as it has made a slight divergence. If played out, price will pull back to retest the 30-SMA or 1.2601 support. On the other hand, if bulls regain momentum, GBP/USD could break the 1.2750 barrier.
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