CFD Trading Rate Great Britain Pound vs US Dollar (GBPUSD)

• GBP/USD trades on a stronger note near 1.2450 amid softer USD on Wednesday. 
• US flash S&P Global Manufacturing and Services PMI came in weaker than expectations in April. 
• BoE’s Pill said inflation must be squeezed out of the UK economy and cautioned against cutting too soon.

The GBP/USD pair recovers to 1.2450 on Wednesday during the early Asian session. The downbeat US April PMI data and increasing appetite for the risk-linked space exert some selling pressure on the US Dollar (USD). Later in the day, the US Durable Goods Orders and weekly Mortgage Applications will be released. 

Business activity in the United States slowed in April to a four-month low owing to lower demand, according to the S&P Global report on Tuesday. The flash Manufacturing PMI came in weaker than the expectation, dropping to 49.9 in April from 51.9 in the previous reading. Meanwhile, the Services PMI declined to 50.9 from 51.7, below the market consensus of 52.0. Finally, the Composite PMI, which tracks both the manufacturing and services sectors, fell to 50.9 in April from 52.1 in March. The Greenback has attracted some sellers in response to the US economic data.  

The Federal Reserve (Fed) officials look for signs that the economy is ebbing enough to bring inflation down further, even though the data in recent weeks showed hotter-than-expected inflation and employment readings. The US central bank will schedule the monetary policy meeting next week, and markets expect the Fed to leave its policy rate unchanged in the current 5.25%–5.50% range. Several Fed policymakers signaled at least one rate cut this year and indicated that monetary policy needs to be restrictive for longer. This, in turn, continues to lift the USD and cap the upside of GBP/USD. 

On the other hand, the speculation that the Bank of England (BoE) will cut interest rates in summer declined as the UK chief economist reiterated the need for “restrictive” monetary policy. On Tuesday, BoE Chief Economist Huw Pill said that easing in headline inflation was not enough of a reason to ease policy, adding that there were greater risks from cutting the rates too quickly, rather than too late. These comments provide some support to the Pound Sterling (GBP) against the USD.  

• GBP/USD surges over 0.65% following disappointing US economic figures.
• Technical analysis indicates a potential upward movement if GBP/USD sustains a close near 1.2440, completing a 'morning star' pattern.
• Key resistances are ahead at 1.2500 and the 200-day moving average at 1.2565; downside risks persist below 1.2400.

The Pound Sterling rallied early in the North American session, gaining more than 0.65% against the US Dollar after softer-than-expected data from the United States (US), which could spur the Federal Reserve to begin to ease policy faster than expected. The GBP/USD trades at 1.2434, after bouncing off lows hit at 1.2331.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD is still downward biased, as key resistance levels remain respected by price action. However, if the major achieves a daily close around the 1.2440 area, that will complete a ‘morning star’ candlestick chart pattern, suggesting the pair could aim higher.

In that event, the GBP/USD first resistance would be the 1.2500 psychological level. Once broken, further gains are seen, with the 200-day moving average (DMA) up next at 1.2565, ahead of 1.2600. Key resistance levels emerge at the 50-DMA at 1.2628 and the 100-DMA at 1.2649.

On the flip side, further losses are seen if the pair drops below 1.2400. A breach of the latter would pave the way to challenge the year-to-date (YTD) low of 1.2299.

GBP/USD Price Action – Daily Chart

• GBP/USD holds steady on Tuesday amid subdued USD demand, albeit lacks bullish conviction.
• The divergent Fed-BoE policy expectations turn out to be a key factor acting as a headwind.
• The technical setup suggests that the path of least resistance for the pair is to the downside.

The GBP/USD pair struggles to capitalize on the overnight bounce from the 1.2300 mark, or its lowest level since November 14 and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around mid-1.2300s, nearly unchanged for the day, and remain at the mercy of the US Dollar (USD) price dynamics.

Receding fears about a wider Middle East conflict remain supportive of a generally positive risk tone, which is seen undermining the safe-haven buck and lending some support to the GBP/USD pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer amid sticky inflation continues to act as a tailwind for the Greenback. Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) further contribute to capping the upside for the pair.

From a technical perspective, the recent breakdown through the 1.2540-1.2535 horizontal support and descending trend-channel support near the 1.2400 mark was seen as a fresh trigger for bearish traders. That said, the Relative Strength Index (RSI) on the daily chart is flashing oversold conditions. This makes it prudent to wait for some consolidation or a modest recovery before positioning for further losses. Nevertheless, the GBP/USD pair seems vulnerable to extending the downtrend from the YTD peak touched in March.

In the meantime, any meaningful recovery is likely to confront stiff resistance near the 1.2400 support breakpoint, which if cleared might trigger a short-covering rally and lift spot prices to the 1.2465-1.2470 region. The momentum could get extended further, though is more likely to remain capped near the 1.2500 psychological mark. The latter should act as a key pivotal point, above which the GBP/USD pair could surpass the 1.2535-1.2540 support-turned-resistance and aim to reclaim the 1.2600 round figure.

On the flip side, the overnight swing low, around the 1.2300 mark, now seems to protect the immediate downside. Some follow-through selling will reaffirm the negative bias and drag the GBP/USD pair to the next relevant support near the 1.2245 region en route to the 1.2200 round figure and the 1.2135 zone.

GBP/USD daily chart

• GBP/USD extends its downside around 1.2350 in Tuesday’s early Asian session.
• Several Fed officials emphasized the US central bank is not in a hurry on interest rate cuts.
• Investors continue to price in the BoE will cut the interest rate earlier than the US Fed. 

The GBP/USD pair remains on the defensive near 1.2350, the lowest since mid-November on Tuesday during the early Asian session. The USD Index (DXY) consolidates its gains above 106.10 as traders await the preliminary S&P Global Purchasing Managers Index (PMI) data from the US and UK for April.

The Federal Reserve (Fed) policymakers agreed that inflation in the US is coming down slowly, but remains high. Therefore, the US central bank is not in a hurry on interest rate cuts. Atlanta Fed President Raphael Bostic noted that interest rates will have to be kept at a "restrictive level" and might only ease "at the end of 2024”. Meanwhile, Chicago Fed President Austan Goolsbee signaled a longer timeline for rate cuts as progress on inflation had "stalled.”. The hawkish stance of the Fed on interest rates so far this year has boosted the US Dollar (USD) and created a headwind for the GBP/USD pair.

On Monday, the Chicago Fed National Activity Index improved to 0.15 in March from 0.09 in the previous reading, according to the Fed Bank of Chicago. The attention will shift to the April PMI reports, due later on Tuesday. Both manufacturing and Services PMI figures are projected to improve in April. If the reports show a stronger-than-expected outcome, this could provide some support to the Greenback and cap the major pair’s upside.

On the other hand, interest rate futures are fully priced in a first quarter-point interest rate cut by the Bank of England for August and see two rate cuts before the end of the year. The growing speculation that the UK central bank will cut the interest rate earlier than the US Fed exerts some selling pressure on the Pound Sterling (GBP). Last week, BoE Deputy Governor Dave Ramsden said the progress on UK inflation and the downbeat economic outlook will allow the BoE to begin the rate cut cycle earlier than previously expected. Investors have priced in a 60% odds of a June rate cut near 60%, per Reuters.

• GBP/USD declines following dovish signals from Bank of England officials, with traders eyeing potential August rate cut.
• Strong US manufacturing data and a less dovish stance from the Federal Reserve boost the Greenback.
• Upcoming PMIs in the UK and US could further influence the currency pair.

The Pound Sterling lost ground against the US Dollar and dropped to its lowest level since November last year as investors began to price in a more dovish Bank of England. A scarce economic docket in the UK, left GBP/USD traders adrift to market mood and dynamics linked to the buck. Therefore, the pair trades at 1.2350, down 0.12%.

GBP/USD falls to 1.2350 amid speculation of BoE’s faster rate cuts

Last week, Bank of England Governor Andrew Baily said that inflation is edging lower and might warrant a rate cut. On Friday, BoE Deputy Governor Dave Ramsden shifted slightly dovish, saying that he expects incoming data to accentuate the economy's slowdown.

The swaps markets suggest the Bank of England might cut rates in August, with odds standing at 95.9%.

Across the pond, manufacturing activity in the United States (US) gathers steam, as revealed by the Chicago Federal Reserve. The Chicago Fed National Activity Index (CFNAI) rose to 0.15 in March from 0.09 in February. The index’s three-month moving average increased from -0.28 in February to -0.19 in March.

That, along with the hawkish tilt adopted by Federal Reserve Chair Jerome Powell, increased the odds of a less dovish Fed. Market participants expect fewer rate cuts than the Fed's March Summary of Economic Projections (SEP) projection.

Chicago Board of Trader (CBOT) data depicts the Fed could begin to ease policy until September 2024, a month after the BoE. That would keep the GBP/USD downward pressured, as the interest rate differential favors the Fed.

What’s ahead for the GBP/USD?

Ahead of the week, the UK economic docket will feature PMIs. In the US, Fed officials began its blackout period ahead of the May 1 meeting. However, April PMIs and housing data will be released by S&P Global.

• GBP/USD attracts some dip-buyers on Monday amid a softer USD, though lacks follow-through.
• Easing geopolitical tensions boosts investors’ confidence and undermines the safe-haven buck.
• Reduced Fed rate cut bets should help limit the USD losses and cap any further gains for the pair.

The GBP/USD pair stages a modest recovery from the 1.2365-1.2360 area, or its lowest level since November 14 touched during the Asian session on Monday and for now, seems to have snapped a two-day losing streak. The uptick is supported by a modest US Dollar (USD) downtick and lift spot prices back closer to the 1.2400 mark in the last hour, though any meaningful upside still seems elusive. 

Iran signaled that it has no plans to retaliate against the Israeli limited-scale missiles strike on Friday, easing fears about a further escalation of tensions in the Middle East. This, in turn, boosts investors' confidence, which, in turn, is seen undermining the safe-haven Greenback and acting as a tailwind for the GBP/USD pair. Meanwhile, expectations that the Federal Reserve (Fed) will keep rates higher for longer in the wake of still-sticky inflation in the US help limit the USD downside and might cap the major. 

Market participants have been pushing back their expectations about the likely timing when the Fed will start cutting rates to September and also downsizing their bets for the number of rate cuts this year. The hawkish outlook remains supportive of elevated US Treasury bond yields and acts as a tailwind for the buck. Apart from this, speculations about more aggressive policy easing by the Bank of England (BoE) might contribute to keeping a lid on any further appreciating move for the GBP/USD pair. 

There isn't any relevant market-moving economic data due for release on Monday, either from the UK or the US, leaving spot prices at the mercy of the USD price dynamics. The focus, meanwhile, will remain glued to this week's important US macro data – the Advance Q1 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday and Friday, respectively. Apart from this, the flash UK/US PMI prints might provide some meaningful impetus to the GBP/USD pair.

• GBP/USD falls 0.48% to 1.2376, influenced by rising geopolitical risks and statements from major central banks.
• Bank of England's Deputy Governor comments on inflation risks fail to support Sterling as it hits new lows.
• Mixed economic data from the UK with stagnant retail sales in March, contrasting with modest annual growth.

The Pound Sterling tumbles against the US Dollar during the mid-North American session after a volatile trading day due to an escalation of the Israel-Iran conflict. Major central bank speakers led by the Bank of England (BoE) and the Federal Reserve (Fed), continued to set the tone for the financial markets. The GBP/USD trades at 1.2376, down 0.48%.

GBP/USD slides as Israel-Iran conflict escalates

According to Reuters, there were explosions over an Iranian city on Friday, in what sources described as an Israel attack. However, Iranian authorities downtoned the event and stated they had no plans for retaliation. As a consequence, the GBP/USD tumbled toward 1.2388, a new five-month low, before recovering some ground.

Words from the BoE’s Deputy Governor Dave Ramsden failed to underpin Cable, which refreshed five-month lows at 1.2372. Ramsden said he would consider the implications of Forex for inflation, adding that the bank would do what makes sense in terms of the BoE’s mandate. He added the disinflation process would be bumpy, but risks are tilted to the downside.

In addition, Chicago’s Fed President Austan Goolsbee adopted a neutral stance, slightly boosting the Greenback. He commented that progress on inflation has stalled, suggesting that a pause would allow incoming data to provide insight into the disinflation process.

British Retail Sales showed signs of stagnation during the European session in March compared to February’s reading. Analysts were expecting sales to grow 0.3% MoM, which came at 0%, while core sales tumbled from 0.3% to -0.3%. On an annual basis, the Office for National Statistics (ONS) revealed that sales rose by 0.8%, which is up from a drop of -0.3% in February.

GBP/USD Price Analysis: Technical outlook

After breaching below 1.2400, the GBP/USD could resume its ongoing downtrend. Unless buyers regain the 1.2400 mark, sellers are in charge. The first support would be the November 17 low of 1.2373, followed by the November 10 low of 1.2187. On the other hand, if buyers reclaim 1.24000, the next key resistance area would be the April 18 high at 1.2484, ahead of 1.2500.

• GBP/USD loses traction around 1.2430 amid the firmer US dollar on Friday. 
• The Fed’s hawkish comments boost the Greenback against the GBP. 
• BoE’s Greene said rate cuts were not imminent and that inflation remains too high. 

The GBP/USD pair remains on the defensive near 1.2430 during the early Asian session on Friday. The downtick of the major pair is backed by the stronger US Dollar (USD) as the strong US economic data and hawkish remarks from the Federal Reserve (Fed) officials have triggered the speculation that the US central bank will delay interest rate cuts to September.

On Thursday, Atlanta Fed President Raphael Bostic said that US inflation is too high and the central bank still has a way to go on inflation. Bostic further stated that he’s comfortable being patient and rate cuts are likely by year end. New York Fed President John Williams emphasized that the Fed is data-dependent and noted that he doesn't feel an urgency to cut rates. Investors are now pricing in nearly 66% odds that the Fed will cut its rate in September, according to the CME FedWatch Tool.  

About the data, the US Initial Jobless Claims for the week ending April 13 increased below market expectations, rising by 212,000 from the previous week of 212,000. Meanwhile, the Philadelphia Fed Manufacturing Index jumped to 15.5 in April from 3.2 in March, beating the estimation of 1.5. Finally, US Existing Home Sales dropped by 4.3% MoM to 4.19 million from 4.38 million, worse than the anticipated 4.2 million.

On the GBP’s front, the expectation that the Bank of England (BoE) might cut its interest rate ahead of the US Fed has exerted some selling pressure on the Pound Sterling (GBP) against the USD. However, BoE policymaker Megan Greene said on Wednesday that rate cuts were not imminent, and the combination of high inflation and weak growth means there is a way to go to bring inflation back to target. Greene added that the recent tensions in the Middle East could pose a risk to the inflation outlook, including by elevating inflation expectations. These comments failed to boost the GBP from nearly six-month lows. Investors will take more cues from the UK March Retail Sales, along with the speeches by BoE’s Ramsden and Breeden later on Friday. 

• GBP/USD remains flat, influenced by BoE's Megan Greene remarks and multiple Fed officials emphasizing rate patience.
• US economic updates reveal a decrease in Jobless Claims and a surge in the Philadelphia Fed Index but a drop in home sales.
• Shift in rate cut expectations for the Fed impacts currency strength, with only two cuts now anticipated in 2024.

The Pound Sterling is virtually unchanged against the US Dollar in the mid-North American session, amid a scarce economic docket in the United Kingdom (UK) if not interrupted by Bank of England (BoE) member Megan Greene. A slew of Federal Reserve officials keep pounding the mantra of patience when easing rates. The GBP/USD trades at 1.2456, almost flat.

BoE and Fed officials impact Sterling as US data shows mixed signals

Major central bank policymakers are grabbing the headlines, leaving economic data in the background. Therefore, Fed and BoE speakers are driving GBP/USD price action.

Recently, Atlanta’s Fed President Raphael Bostic said inflation is too high, that the US central bank still has a way to go on inflation, and that they won’t be able to reduce rates. Earlier, the New York Fed President John Williams said the Fed is data dependent and emphasized that monetary policy is in a good place, so he isn’t in a rush to cut rates. His baseline doesn’t consider hiking rates but added that the Fed will hike if needed.

On the BoE’s front, Megan Greene commented that inflation data is too high for the institution to consider cutting the Bank Rate. Greene blamed inflation in wages and services as not being “consistent with a sustainable 2% (consumer price) inflation target.”

Elsewhere, the US Department of Labor revealed that for the week ending April 13, US Initial Jobless Claims fell to 212K, below the predicted 215K. Continuing Jobless Claims for the week of April 6 slightly rose to 1.812 million from 1.810 million but were still below the expected 1.818 million.

Other featured data included the Philadelphia Fed Manufacturing Index, which experienced a significant increase, jumping to 15.5, far surpassing the modest expectation of 1.5. In the housing market, US Existing Home Sales declined by 4.3% month-over-month, falling from 4.38 million to 4.19 million, which was also below the anticipated 4.2 million.

Given the fundamental backdrop, traders expect just two rate cuts by the Fed instead of the six projected at the beginning of 2024. That has witnessed flows to the Greenback, which has been up nearly 4.50% so far this year. Hence, if the BoE cuts before the Fed, the GBP/USD pair could be driven lower.

GBP/USD Price Analysis: Technical outlook

The GBP/USD daily chart shifted bearishly once the pair dived below the November 22, 2023, swing low of 1.2448, which exposed the 1.2400 mark. Although buyers had achieved to recover some ground, the latest four candles in the daily chart show that buying pressure is building near the 1.2480/90 area. If the pair dives below 1.2400, further losses remain. The next key support level would be the November 17 daily low at 1.2374, followed by the November 10 low at 1.2187.

On the flip side, if buyers reclaim 1.2500, look for a recovery, but they must conquer the 200-day moving average (DMA) at 1.2575.

• GBP/USD edges lower to 1.2450 in Thursday’s early Asian session. 
• Further easing in UK inflation data prompted the expectation that the BoE will start lowering interest rates this year. 
• Fed Chair Jerome Powell said he will wait longer than previously expected to cut rates after unexpectedly upside inflation readings.

The GBP/USD pair trades on a softer note around 1.2450 during the early Asian trading hours on Thursday. The softer UK inflation data prompted the expectation that the Bank of England (BoE) will start lowering interest rates in the coming months, which weighs on the Pound Sterling (GBP) against the Greenback. Investors will take more cues from the US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, the CB Leading Index, and Existing Home Sales, due on Thursday. 

The BoE hinted that the UK is still on course for an interest rate cut, as recent data showed a further easing in the pace of price growth in the economy. On Wednesday, the Office for National Statistics (ONS) showed that the UK Consumer Price Index (CPI) inflation dropped to 3.2% in the 12 months to March, the softest level for two-and-a-half years. The figure was down from the previous reading of 3.4%. However, investors expect the first rate cut in August or September, according to the LSEG data. 

On the USD’s front, the upbeat February's Retail Sales earlier this week suggested a robust economy in the United States. The report triggered speculation that the Federal Reserve (Fed) might delay its easing cycle this year. The Fed Chair Jerome Powell stated that he will wait longer than previously expected to cut rates after unexpectedly upside inflation readings. Powell added that the US central bank will likely take more time to gain confidence that price growth is headed toward the Fed’s 2% target before lowering borrowing costs. This, in turn, provides some support to the Greenback and caps the upside of the GBP/USD pair. 

• Markets are pushing the start of the easing cycle from the BoE to September.
• Fed Chair Powell's hawkish stance on Tuesday strengthened the US Dollar.
• As the BoE and Fed’s policies align, the Pound may see additional gains.

The GBP/USD pair is currently trading slightly higher at 1.2448, tallying daily gains. Meanwhile, the USD’s rally was halted due to US Treasury yields declining, but the Greenback’s outlook is bright as the US economy remains strong and markets bet on a more aggressive Federal Reserve (Fed).

Earlier in the session, the UK's Consumer Price Index (CPI) for March reported a slight increase, indicating ongoing inflationary pressures. As a reaction, markets readjusted their expectations on the next decisions from the British bank, and the initial cut is now anticipated for September, a delay from previously expected August. Furthermore, the likelihood of a second reduction in December has decreased to 60% from being fully anticipated earlier in the week. This recalibration of expectations has benefited the Pound on Wednesday.

In line with that, the US continues to see robust inflation and economic figures, underpinning the Fed’s decision to maintain a restrictive policy stance longer than initially expected. So as both bank's policies align, the GBP may see further gains or the pace of the pair may be dictated by how wide the US and GBP’s yield spreads get.

GBP/USD technical analysis

On the daily chart, the Relative Strength Index (RSI) is edging towards oversold territory. On Wednesday, there was a positive movement from 31 to 34 which suggests that the market is currently dominated by sellers, and the pair might be due for a price correction or reversal as sellers take a breather.

When assessing the wider scenario, it's noticeable that the GBP/USD has been trading below the Simple Moving Averages (SMAs) for 20-day, 100-day, and 200-day periods which suggests that the overall trend remains bearish. That being said, traders should pay close attention to an impending bearish crossover at 1.2570 between the 20 and 200-day SMA, which could add further downside pressure on the GBP/USD.

• GBP/USD attracts some sellers to 1.2430 on the stronger USD. 
• Fed’s Powell said the US monetary policy needs to be restrictive for longer. 
• BoE’s Bailey saw strong evidence that UK inflation was falling. 

The GBP/USD pair remains on the defensive around 1.2430 during the early Asian session on Wednesday. The further upside in the US Dollar (USD) from a hawkish tilt by Federal Reserve (Fed) Chair Jerome Powell and upbeat US Retail Sales data weighs on the GBP/USD pair. Investors will take more cues from the UK Consumer Price Index (CPI) on Wednesday. 

The Fed Chair Jerome Powell said on Tuesday that monetary policy needs to be restrictive for longer and further dampen investors' hopes for meaningful rate cuts this year. Powell added that the recent economic data have clearly not given the Fed greater confidence and it's likely to take longer than expected to achieve that confidence. The US central bank has kept its benchmark interest rate in a target range between 5.25% and 5.5% since July 2023. Financial markets have had to reset their expectations for rate cuts this year, with the anticipation of one or two reductions that will not start until September.

On the other hand, investors price in two rate cuts by the Bank of England (BoE) this year, with the first move in August or September and earlier rate cuts than the Fed. This, in turn, has exerted some selling pressure on the Pound Sterling (GBP) and created a headwind for the GBP/USD pair. 

The BoE Governor Andrew Bailey said on Tuesday there was strong evidence that UK inflation was falling and that the question for BoE policymakers remained how much more evidence was necessary before starting to cut interest rates. Bailey further stated that different inflation paths for the US and Europe this year could lead to somewhat different paths for interest rates.

• The Pound drops on weak UK employment data, to retest support area at 1.2430.
• UK Unemployment rate increased to 4.2% in the three months to February against expectations of a 4% reading.
• Investors’ focus is on Wednesday’s UK CPI data for more clues about the BoE’s monetary policy outlook.

The Sterling has resumed its broader bearish trend during Tuesday’s London trading session. The uninspiring UK employment figures have endorsed the theory that the BoE might start cutting rates ahead of schedule, which has punished the GBP.

The Claimant count range increased below expectations but wage growth eased to 6% YoY in the three months before February, from from 6.1% in the previous period. But above all, the unemployment rate increased to 4.2% disappointing the market that had forecasted a 4% rate, unchanged from the previous month.

The US Dollar maintains its bullish trend intact, fuelled by higher US Treasury yields. The 10-year benchmark yield is trading at year-to-date highs near 4.70%. The 2-year yield the most closely related to interest rate expectations remains pinned to the key 5% level.

Later on Tuesday BoE Governor Bailey is expected to meet the press although the highlight of the week in the UK will be Wednesday’s CPI data, which is expected to have cooled significantly. Also on Tuesday, Fed Governor, Jerome Powell is expected to participate in a panel discussion in Washington. His comments about monetary policy might have some impact on US Dollar crosses.

GBP/USD Price Analysis: Technical outlook

Bears have pushed the pair back to the bottom of the monthly descending channel, at 1.2430, which is being tested at the moment. Last Friday’s low is right below there, at 1.2430. A clear break of that support area clears the path towards 1.2370. Further down there is no support until 1.2220.

On the upside 1.2505 level should be cleared to advance towards 1.2565, where an unmitigated order block may provide a fresh boost for bears.

• GBP/USD drops to a fresh YTD low and is pressured by a combination of factors.
• Bets for more aggressive policy easing by the BoE continue to weigh on the GBP.
• Reduced Fed rate cut bets underpin the USD and also contribute to the downfall.

The GBP/USD pair drifts lower for the third straight day on Tuesday – also marking the fourth day of a negative move in the previous five – and drops to its lowest level since November 17 during the Asian session. Spot prices currently trade around the 1.2420 region as traders now look to the UK monthly employment details for a fresh impetus.

According to the consensus estimates, the number of people claiming unemployment-related benefits are expected to rise to 17.2K from 16.8K previous and the jobless rate is seen edging higher from 3.9% to 4% during the three months to March. This could offer more evidence that the jobs market is cooling and reinforce bets for at least four rate cuts by the Bank of England (BoE) this year, starting in June, which should weigh on the British Pound (GBP) and drag the GBP/USD pair lower. 

Meanwhile, the immediate market reaction to a surprisingly stronger report is more likely to be limited in the wake of a strong bullish sentiment surrounding the US Dollar (USD), bolstered by hawkish Federal Reserve (Fed) expectations. Investors pushed back their expectations for the first interest rate cut by the Fed to September from June following the release of hotter-than-expected US consumer inflation figures. This keeps the US Treasury bond yields elevated and underpins the buck.

Apart from this, persistent geopolitical tensions stemming from the ongoing conflicts in the Middle East turn out to be another factor that benefits the Greenback's relative safe-haven status. This, in turn, suggests that the path of least resistance for the GBP/USD pair is to the downside and any attempted recovery might now be seen as a selling opportunity. Traders on Tuesday will further take cues from the US macro data and speeches by FOMC members, including Fed Chair Jerome Powell.

• Pound’s failure to break resistance at 1.2500 leaves bears in control.
• Strong US retail sales figures have pushed the pair back to the bottom of the monthly channel, at 1.2440.
• Below 2.1430, the next support levels are 1.2370 and 1.2220.

Sterling’s recovery attempts have failed to find a significant acceptance above the 1.2500 level earlier on Monday. The pair has succumbed to the broad-based US Dollar strength after the release of upbeat US retail sales figures.

US Consumer spending has beaten expectations in MArch adding to the evidence of a strong US economic outlook. Beyond that, growing concerts about the consequences of an escalation in the Middle East conflict are additional support for the safe-haven USD.

GBP/USD Price Analysis: Technical outlook

Bears have pushed the pair back to the bottom of the monthly descending channel, at 1.2440, which is being tested at the moment. Last Friday’s low is right below there, at 1.2430. A clear break of that support area clears the path towards 1.2370. Further down there is no support until 1.2220.

On the upside 1.2505 level should be cleared to advance towards 1.2565, where an unmitigated order block may provide a fresh boost for bears.
 

GBP/USD 4-Hour Chart

• GBP/USD rebounds from lows since November amid expectations of the Fed delaying rate cuts.
• The escalated Middle-East tension could bolster the demand for the US Dollar.
• BoE could reduce policy rates to around 4.75% by 2024, down from the current rate of 5.25%.

GBP/USD gains ground amid a stable US Dollar (USD), trading around 1.2460 during Asian hours on Monday. The US Dollar (USD) maintains its position below its peak since November 2023, potentially restricting the upward momentum of the GBP/USD pair.

US Dollar Index (DXY) hovers around 106.00, with the 2-year and 10-year yields on US Treasury bonds standing at 4.91% and 4.55%, respectively, by the press time. The elevated US yields may offer support to bolster the US Dollar (USD).

Meanwhile, the Federal Reserve (Fed) seems to reevaluate its monetary easing plans due to ongoing US inflation and robust macroeconomic indicators. According to the CME FedWatch Tool, there has been a notable increase in the likelihood of interest rates remaining unchanged at the June meeting, rising to 63.5% from 46.8% the previous week.

Investors will likely observe Federal Reserve Bank of Kansas President Lorie Logan while participating in a panel discussion at the BoJ-IMF conference on Monday. Furthermore, US Retail Sales figures will be eyed later in the North American session.

On the other side, on Friday, the Pound Sterling (GBP) dipped against the US Dollar to its lowest level since November, reaching 1.2426. Heightened tensions in the Middle East likely prompted traders to seek refuge in the US Dollar.

However, market forecasts for interest rate cuts by the Bank of England (BoE) have been adjusted, with the policy rate now expected to decline to around 4.75% by the end of 2024, down from the current rate of 5.25%. This marks a shift from the previous expectation of a drop to 4.5% by December.

BoE’s policymaker, Megan Greene emphasized that rate cuts in the United Kingdom (UK) should still be considered distant, pointing to a greater risk of persistent inflation in the UK compared to the US. Additionally, traders will likely pay close attention to the speech by Sarah Breeden, BoE's Deputy Governor for Financial Stability, at the Innovate Finance Global Summit 2024 on Monday.

• GBP/USD falls sharply, influenced by a move towards safer assets and a strengthening US Dollar.
• Technical analysis indicates a shift to bearish territory after dropping below the 200-day moving average.
• Recovery targets include reclaiming 1.2500, with resistance at the 200-day DMA.

The British Pound plunged against the US Dollar late in the North American session, down 0.74%, and trades at 1.2445 after hitting a daily high of 1.2559. Risk aversion triggered a flight to safety, a headwind for the Pound Sterling even though UK GDP figures were solid.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD shifted bearish as it achieved a successive series of lower highs and lows while breaching key support levels. On its way south, the pair cleared the 200-day moving average (DMA) at 1.2584, which opened the door to a tumble below 1.2500.

For a bearish continuation, the GBP/USD needs to clear the 1.2400 mark. A breach of the latter will expose the November 17, 2023, low of 1.2374, followed by the 1.2300 mark.

On the other hand, if buyers lift the GBP/USD past the 1.2500, that could pave the way for further gains. The next resistance would be the 200-day moving average (DMA) at 1.2584, ahead of 1.2600.

As the GBP/USD dropped below key support levels and achieved

GBP/USD Price Action – Daily Chart

• GBP/USD plunges below 1.2500 as faded Fed rate cut hopes strengthen the US Dollar.
• The market sentiment is risk-off as the Fed is expected to delay rate cuts later this year.
• The UK economy is on course to come out of a technical recession.

The GBP/USD pair dips below the psychological support of 1.2500 in Friday’s London session. The Cable weakens due to firm US Dollar. The demand for the US Dollar remains buoyant as stubbornly higher United States inflation data for March forced traders to price out market expectations for rate cuts by the Federal Reserve (Fed), which were anticipated in the June and July meetings.

The market sentiment is downbeat as the Fed is now projected to start reducing interest rates from the September meeting. Also, investors expect that there will be only two rate cuts this year instead of three. There were expectations of six rate cuts at the start of the year.

S&P 500 futures have generated some losses in the European session. The US Dollar Index (DXY) rallies to near 106.00 amid hopes that the Fed will begin reducing interest rates later than other central banks from developed economies. 10-year US Treasury yields fell slightly from four-month high around 4.60%.

Going forward, the US Dollar will be guided by the monthly Retail Sales data of March which will be published on Friday. The monthly Retail Sales data that represents households’ spending is forecasted to have grown at a slower pace of 0.3% from the former reading of 0.6%. This would ease fears of inflation remaining persistently higher.

On the United Kingdom front, the Pound Sterling fails to find bid despite upbeat factory data and expected increase in monthly Gross Domestic Product (GDP) for February. The UK GDP expanded by 0.1% as expected after rising 0.2% in January. Proof of expansion in first two months indicate that the technical recession recorded in the second half of 2023 was shallow.

Next week, the US Consumer Price Index (CPI) and labor market data will significantly influence speculation for the Bank of England (BoE) to begin reducing interest rates, which financial markets are currently expecting from August.

• GBP/USD trades on a softer note around 1.2530 following UK GDP numbers on Friday. 
• UK monthly Gross Domestic Product (GDP) grew 0.1% MoM in February vs. the 0.1% expected. 
• The lower speculation of Fed rate cuts this year lifts the Greenback and weighs on the pair. 

The GBP/USD pair remains on the defensive near 1.2530 during the early European trading hours on Friday. The major pair remains vulnerable despite the stronger-than-expected UK monthly GDP numbers and improved Industrial Production data. 

The latest data released from the Office for National Statistics on Friday showed that the UK monthly Gross Domestic Product (GDP) grew 0.1% MoM in February, compared to an expansion of 0.3% in the previous reading, matching the estimation of a 0.1% expansion. Additionally, UK Industrial Production for February came in better than the market expectation, improving to 1.1% MoM from a 0.3% decline in January. Finally, the UK Goods Trade Balance arrived at GBP-14.212 billion MoM in February from GBP-14.097 billion prior, better than GBP-14.5B expected. The upbeat UK economic data failed to boost the Pound Sterling (GBP) as the markets anticipate the Bank of England (BoE) will cut its interest rate sooner than the US Federal Reserve (Fed).

On the other hand, the recent hotter-than-expected CPI inflation reading and stronger Nonfarm Payrolls (NFP) trigger speculation that the Fed will have to push back the number and timing of interest rate cuts this year. This, in turn, provides some support to the Greenback and creates a headwind for the GBP/USD pair. Investors will take more cues from the preliminary US Michigan Consumer Sentiment Index for April, along with the Fed's Bostic and Daly speeches later on Friday.