- There is a 60% chance the BoE will cut rates on Thursday.
- Services inflation in the UK has remained stubbornly high.
- Investors are hoping for a signal that the Fed will start cutting rates in September.
GBP/USD price analysis leans slightly bullish as the pound shows signs of recovery ahead of the Fed and Bank of England policy meetings. The Fed is likely to keep current rates on hold, while the BoE is more likely to cut them.
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The pound recovered on Tuesday after falling in the previous session as bets on a BoE rate cut increased. Until Friday, markets had a 50% chance that the BoE would cut in August. However, this figure rose to 60% on Monday, weighing on the pound.
Traders depend on speculation and the outlook for Fed policy. Due to the 4th of July election, UK policymakers have been silent for almost two months. As a result, there was little guidance on where rates might be in August.
Inflation in the country reached the target of 2%. However, services inflation has remained stubbornly high, keeping policymakers cautious. Still, with US inflation softening, there is hope that the Fed will move, allowing other major central banks to follow suit.
Meanwhile, the Fed’s policy meeting will significantly influence expectations for a September rate cut. In recent speeches, Powell has acknowledged progress on inflation. He said there is growing confidence that inflation will fall to the 2 percent target. In addition, Powell noted the recent softer numbers on the labor market, which could increase the urgency of interest rate cuts. Therefore, market participants are hoping for a signal that the Fed will start cutting rates in September.
GBP/USD key events today
- Consumer Confidence USA CB
- US JOLTS Job Openings
GBP/USD technical price analysis: Weak bearish momentum signals a corrective move
On the technical side, the GBP/USD price is trading in a tight, bearish channel with clear support and resistance lines. The decline began when the price failed to sustain a move above the 1.3001 resistance level. However, the bears were unable to make significant swings below the 30-SMA, indicating weak momentum.
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This weak momentum can also be seen in the RSI, which failed to reach the oversold region. Therefore, this could be a corrective move. Bulls could take control with a break above the 30-SMA. Otherwise, the slow downtrend will continue below the support level at 1.2800.
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