- The dollar was on the back foot as traders positioned themselves ahead of the FOMC policy meeting.
- Economists forecast a 0.2% drop in US retail sales.
- Forecasts show that consumer inflation in the UK could remain at 2.2%.
GBP/USD price analysis points to continued strength as the pound climbs to new highs, while the dollar falls as bets on a 50 bps Fed rate cut rise. At the same time, market participants are eagerly awaiting UK inflation data and the Bank of England’s policy meeting.
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On Tuesday, the dollar was on the back foot as traders positioned themselves ahead of the FOMC policy meeting. Futures show a higher chance of a 50 bps rate cut than a 25 bps rate cut. This shift in expectations came on Friday after dovish reports from major US news outlets. At the same time, a retired Fed official said there was a strong case for a significant rate cut on Wednesday.
However, this outlook could change again after the US retail sales report. Economists are predicting a 0.2% drop in sales. A bigger-than-expected drop in sales could fuel bets on a massive cut, further weighing on the dollar. On the other hand, if sales are higher than expected, bets for a smaller cut will increase. In this case, the dollar would rise.
Meanwhile, in the UK, market participants are waiting to see the state of inflation. According to forecasts, consumer inflation could remain at 2.2%. However, the base rate could increase. Currently, the market expects the Bank of England to keep rates unchanged. Still, interest rate cut expectations have risen, with the likelihood of a 25 basis point cut rising from 20% to 38%.
GBP/USD key events today
- US Core Retail m/m
- USA retail m/m
GBP/USD technical price analysis: Bulls break the 1.3200 level
On the technical side, the GBP/USD price has broken above the central level of 1.3200. The bullish bias is strong as the price is well above the SMA. At the same time, the RSI is trading near the overbought region.
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Notably, the last time the price reached the 1.3200 resistance, the bears quickly took over the large candle. Furthermore, the RSI has not entered the overbought region. However, this time the bullish momentum is stronger. Therefore, the price could soon reach the level of 1.3301.
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