GBP/USD Weekly Forecast: Pound Sterling struggles as BoE interest-rate cuts come to sight


  • The Pound Sterling extends its weekly recovery beyond 1.2500.
  • GBP/USD faces interim resistance around 1.2600.
  • The BoE left the door open to an interest rate cut over the summer.

Throughout the week, the British Pound (GBP) traded in a choppy fashion and struggled to extend gains seen in the previous couple of weeks against the US Dollar (USD), prompting GBP/USD to recoup ground lost in the first half of the week and flirt with the key 200-day SMA around 1.2540 on Friday.

Simultaneously, the price action around the Pound Sterling came in tandem with equally vacillating developments in the Greenback, as investors continued to digest the Federal Reserve's (Fed) dovish stance during its May 1 meeting and subsequent comments from Fed rate setters, who maintained their prudent stance when it came to prospects for interest rate cuts.

Undoubtedly, the Bank of England (BoE) monetary policy meeting was the salient event of the week. On the latter, the Monetary Policy Committee (MPC) opted to maintain rates unchanged by a vote of 7-2 on Thursday. Furthermore, the BoE adjusted its inflation projections and emphasized that future rate determinations will hinge on incoming data. Additionally, Governor Bailey expressed a preference for lowering the bank's rates in the upcoming quarters and underscored recent advancements in inflation.

In the wake of the gathering, the BoE's Chief Economist, Huw Pill, noted that MPC members were growing more assured regarding the likelihood of imminent interest rate reductions, although they deemed further evidence necessary to substantiate their decision.

So far, market participants now seem to have started to price in the start of the BoE’s easing cycle in August, although a move in June should not be ruled out just yet.

Additionally, Friday’s auspicious results from the UK docket underpinned the mood around the quid, after GDP readings, Balance of Trade prints and Industrial and Manufacturing Production all surprised to the upside.

GBP/USD: Technical Outlook

The so-far May top at 1.2635 (May 3) is being identified as the upcoming resistance for GBP/USD. A breakout of this level could prompt a revisit of the April peak at 1.2709 (April 9), then potentially reach the weekly high of 1.2803 (March 21), and even extend to the 2024 top of 1.2893 (March 8). Further up comes the weekly peak of 1.2995 (July 27, 2023), just below the psychological 1.3000 yardstick.

On the downside, initial contention lines up at the 2024 low of 1.2299 (April 22), followed by the weekly low of 1.2187 (November 10, 2023), and preceding the October 2023 bottom of 1.2037 (October 4), all ahead of the relevant contention zone of 1.2000.

Observing the daily chart, the Relative Strength Index (RSI) looked stable above the 50 threshold.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.06% 0.10% -0.11% 0.30% 0.01% -0.07% -0.03%
EUR -0.06%   0.04% -0.20% 0.23% -0.03% -0.14% -0.09%
GBP -0.10% -0.04%   -0.21% 0.19% -0.07% -0.15% -0.12%
JPY 0.11% 0.20% 0.21%   0.31% 0.08% 0.02% 0.06%
CAD -0.30% -0.23% -0.19% -0.31%   -0.27% -0.33% -0.31%
AUD -0.01% 0.03% 0.07% -0.08% 0.27%   -0.08% -0.06%
NZD 0.07% 0.14% 0.15% -0.02% 0.33% 0.08%   0.03%
CHF 0.03% 0.09% 0.12% -0.06% 0.31% 0.06% -0.03%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

 

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