- GBP/USD rebounds from weekly lows to a four-week high of 1.2590.
- Swaps market pricing suggests a further 100bps hike by the BoE.
- Key events next week include UK labor market data, GDP figures, and US Fed monetary policy meeting.
GBP/USD climbed to a new four-week high at 1.2590 on Friday. However, it dipped toward the 1.2570s area after a softer-than-estimated Canadian jobs report cemented the case for a Federal Reserve skip in the upcoming monetary policy meeting. The GBP/USD is trading at 1.2576, up 0.14%, set to finish the week with gains of more than 1%.
Positive market sentiment and expected central bank actions favor GBP
Market sentiment is upbeat and pressures safe-haven peers, meaning the US Dollar (USD) trades soft. That, alongside central banks’ divergence between the US Federal Reserve (Fed) and the Bank of England (BoE), favors the Pound Sterling (GBP), with the GBP/USD bouncing from weekly lows of 1.2368.
Next week, Fed Chair Jerome Powell and his colleagues will reveal their fourth decision about monetary policy. The Fed is expected to keep rates at 5.00%-5.25% unchanged compared to May’s meeting, as policymakers would like to see the impact of 500 bps of tightening since March 2022. However, recent hawkish moves delivered by two major central banks that paused their tightening cycles opened the door for a possible hike.
The International Monetary Fund (IMF) urged the Fed and other global central banks to “stay the course” on monetary policy tightening as they scramble to temper inflation.
Aside from this, the UK dodged a recession projected by the Bank of England (BoE) yet is still battling stubbornly high inflation that peaked at 11.1% in October last year. Since then, it has retreated to 8.7%, urging the BoE to raise rates above comfortable levels.
That underpins the GBP/USD, which is set to test the 1.2600 figure, as the swaps markets currently pricing in the BoE will increase rates in the UK up to 5.50%, 100 basis points (bps) higher than current levels.
Upcoming events
Next week, the UK economic calendar will feature labor market data and the Gross Domestic Product (GDP) as the week’s highlights. Across the pond, the Federal Reserve (Fed) monetary policy meeting, the Consumer Price Index (CPI), and Retail Sales would update the status of the US economy.
GBP/USD Price Analysis: Technical outlook
Given the fundamental backdrop, the GBP/USD remains upward biased, set to test 1.2600, as the uptrend accelerates, as shown by the latest upslope trendline drawn from May 30 lows. If GBP/USD clears 1.2600, the May 11 high emerges as the next resistance at 1.2641, ahead of reaching the YTD high at 1.2680. The break above will expose 1.2700. Conversely, the GBP/USD first support would be June 2 high-turned support at 1.2544 before diving towards a broken resistance trendline and the 1.2500 figure confluence.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.