- US consumer inflation data was higher than expected.
- There was a slight improvement in the UK GDP numbers.
- Capital Economics predicted a potential drop in UK inflation to 1.7% in April.
The weekly GBP/USD forecast shows a hint of bearish sentiment as the persistence of US consumer inflation points to the potential for an extended era of high US interest rates.
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GBP/USD Ups and Downs
The pound had a choppy week as investors absorbed data from the US and UK. On Thursday, US consumer inflation data came in higher than expected, leading to a slight adjustment in Fed rate cut bets. However, this changed shortly after the producer price index revealed easing inflation.
Meanwhile, there was a slight improvement in the UK’s GDP numbers. However, the outlook for the economy remains poor.
Next week’s key events for GBP/USD
Investors await key UK news, including employment, inflation and retail sales. Meanwhile, the US will release retail sales data. Investors will focus on the UK inflation report, which could show a drop to 3.8%. On Friday, Capital Economics predicted that Britain could see price growth slow to less than 2% ahead of the US and the eurozone.
Furthermore, the consultancy predicted a potential drop in UK inflation to 1.7% in April, while it forecast 2.0% in the eurozone and 2.6% in the US over the same period. Consequently, investors are speculating on the possibility of a BoE rate cut as early as May.
GBP/USD weekly technical forecast: Bullish growth stops at 1.2800
The charts show that GBP/USD has risen to the 1.2800 resistance level, where the bullish trend has slowed. This trend started strong as buyers took control near the key 1.2202 level. However, it weakened as the price approached the key resistance level at 1.2800. The price is trading closer to the SMA. In addition, the bears have started trying to break below the 22-SMA. However, the main indicator of bullish weakness is the RSI, which has made a bearish divergence. As the bullish momentum wanes, the bears get a chance to take control.
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Therefore, if this continues next week, the bears are likely to break below the 22-SMA to retest the 1.2503 support level. A break below this level would confirm a new bearish trend, as the price would start making lower and lower lows.
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