GBP/USD Forecast: Struggling to hold on to Fed-led gains
|Current Price: 1.2805
- GBP/USD rises above 1.2800 but momentum fades.
- The Bank of England might follow Fed’s steps by easing monetary policy.
The GBP/USD pair was lifted to a high of 1.2845 during the American session after the Fed announced an unscheduled rate cut in an effort to counteract the coronavirus negative effects on the economy. Although the move was surprising, it wasn’t entirely unexpected after Fed’s Chairman Jerome Powell said last week they were ready to act to support growth. Markets had already priced in a 25 bps cut at FOMC’s next meeting and then started to price in a more aggressive move. However, investors seem reluctant to buy the pound amid uncertainty about the future UK-EU trade relationship and fears of a no-deal Brexit. Besides, the Bank of England has hinted at action, so a cut by the Old Lady at the March 26 meeting remains on the cards.
GBP/USD short-term technical outlook
GBP/USD failed to sustain Fed-led gains and quickly pulled back to the 1.2800 area. The short-term technical perspective looks neutral, but failure to consolidate above the psychological level could add pressure on the pound and send the pair back to test four-month lows at 1.2725. On the other hand, a decisive break above 1.2800 could open the door to a test of the 100-day SMA at the 1.2880 zone.
Support levels: 1.2725 1.2695 1.2655
Resistance levels: 1.2845 1.2880 1.2930
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