- Britain’s flash composite PMI revealed an increase from 52.8 to 53.4 in August.
- The pound rose 2% in August as the dollar weakened.
- Markets await Powell’s speech later in the day.
GBP/USD price analysis shows a solid bullish trend as the pound rises to fresh highs following positive UK business activity data. At the same time, the dollar was weak as investors gained confidence in the Fed’s September tapering ahead of Powell’s speech.
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On Thursday, the S&P 500 released the UK flash composite PMI which revealed an increase from 52.8 to 53.4 in August. Meanwhile, economists had expected a smaller rise to 52.9. The rise in business activity was bullish for the pound as it pointed to a resilient economy, dampening expectations of a BoE rate cut.
The pound rose 2% in August as the dollar weakened. Recent US data has increased the likelihood that the Fed will cut rates in September. Inflation is steadily decreasing towards the 2% target. At the same time, the labor market has shown cracks, putting more pressure on the Fed.
US central bank policymakers came out on Thursday supporting a September rate cut. This was a clear departure from their previous cautious tone. With another inflation report, the risk of a big change in the outlook for a rate cut has diminished.
Meanwhile, markets await Powell’s speech later in the day. Experts believe he will repeat what other policymakers have said so far. However, investors will focus on his message regarding the size and pace of future rate cuts. A more dovish outlook after September could further weaken the dollar, raise sterling.
GBP/USD key events today
- Fed President Powell is speaking
- Jackson Hole Symposium
GBP/USD Technical Price Analysis: Overbought Conditions
On the technical side, the GBP/USD price is approaching the key level of 1.3150. The bullish bias is strong as the price has been trading above the 30-SMA for a long time without a pullback. At the same time, the RSI was trading in overbought territory as bulls maintained tremendous momentum.
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However, as the price made new highs, the RSI traded sideways, indicating that the bulls had reached a limit. Therefore, bears may be ready to push the price lower and retest the 30-SMA support. However, bulls could touch 1.3150 before temporarily relinquishing control.
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