- Investors expect a quick transition to a rate cut in the US in 2024.
- Sterling is up almost 4% against the dollar this month.
- On Monday, Sunak revealed 29.5 billion pounds ($36.76 billion) of private sector investment in Britain.
On Tuesday, the GBP/USD outlook shone with bullish optimism, holding above the key 1.2600 mark while the Greenback remained weaker. It is on the verge of posting its biggest monthly gain against the dollar in the past year. In particular, investors are abandoning the dollar, expecting a quick transition to a Fed rate cut in 2024.
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In a potentially beneficial development for the pound’s long-term outlook, Prime Minister Rishi Sunak unveiled a raft of foreign investment in Britain ahead of a gathering of business leaders. The pound is up almost 4% against the dollar this month. Moreover, it is on track for its first monthly gain since June.
Meanwhile, money market traders are predicting that the Bank of England will keep interest rates higher than the Fed until 2024. Accordingly, this outlook has contributed to the pound’s recent rise. Just under two weeks ago, traders were pricing in around 70 basis points of UK rate cuts for next year. However, following recent data releases, including business activity and inflation, this expectation has been adjusted to around 60 bps.
BoE Governor Andrew Bailey, in an interview on Monday, noted that meeting the central bank’s 2% inflation target will be a challenge. Moreover, he attributed the recent decline in inflation to a correction of last year’s spike in energy costs.
At the same time, British Prime Minister Rishi Sunak will host global leaders outside London this week to rebuild the country as Europe’s leading destination for foreign direct investment (FDI).
GBP/USD key events today
- Report of the American Conference Board on Consumer Confidence
GBP/USD Technical Outlook: Bulls are finding their feet above the key 1.2600 level
Bulls are advancing on the charts, making new highs above the 30-SMA. The bullish bias is strong and the price is currently rising after breaking above the resistance level at 1.2600. Therefore, the bulls are likely to break the 1.2651 level soon.
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However, after a big swing from the 30-SMA, the price usually pauses or retraces the upward movement. Therefore, we could see the bears coming back for a retreat. Furthermore, the bullish momentum is close to an extreme level, with the RSI almost overbought. However, the pullback would only be a short break in the uptrend, unless the price breaks below the 30-SMA.
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