**GBP/USD Price Forecast: Pound Holds 1.35 as Fed Easing Sinks the Dollar**
*Author: TradingNews.com, original article by Eric Wilkinson*
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The GBP/USD exchange rate has been under intense scrutiny amid recent shifts in global monetary policy, with particular focus on the Federal Reserve’s pivot toward policy easing. Sterling’s resilience at the 1.35 level is notable, especially as dollar headwinds gather pace. In this comprehensive analysis, we will delve into the factors underpinning the British pound’s performance, the Federal Reserve’s dovish trajectory, technical outlooks, and potential scenarios for traders and investors to consider as 2024 progresses.
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## The Macro Backdrop: Key Drivers Shaping GBP/USD
The GBP/USD, colloquially known as “Cable,” serves as a barometer for global risk appetite and macroeconomic sentiment. The past quarter witnessed significant volatility, largely attributed to shifting central bank stances, mixed economic data from both sides of the Atlantic, and evolving geopolitical risks.
### U.S. Federal Reserve’s Shift to Easing
Recent Federal Reserve meetings have crystallized expectations that the era of relentless rate hikes is over. Markets now anticipate a steady policy rate trajectory, with the possibility of cuts later in the year if economic softness persists.
– **Diminished Rate Hike Bets:** After the May FOMC meeting, market-implied odds of further hikes dropped sharply. Key Fed officials have highlighted an “assessment period,” suggesting a preference to hold or even lower rates as inflation shows signs of moderation.
– **U.S. Data Softens:** Recent inflation prints, wage growth, and retail sales have all moderated, supporting the case for a patient or dovish Fed.
– **Treasury Yields Decline:** Benchmark U.S. Treasury yields have retreated from their highs, underscoring the shift in rate expectations and putting pressure on the dollar.
### The Bank of England Maintains a Watchful Stance
While the Bank of England (BoE) has also signaled an end to immediate tightening, its policy messaging remains more guarded than the Fed.
– **Inflation Still Elevated:** UK inflation, though off its early-2023 peaks, persists near 4 percent—well above the BoE’s 2 percent target. Sticky services inflation and robust wage growth keep policymakers cautious.
– **Gradual Policy Normalization:** The BoE’s guidance hints at longer-than-expected holding of current rates, supporting the pound relative to the dollar.
### Other Influences Supporting Sterling
Beyond central bank policy, fundamental and sentiment-related factors are providing a tailwind for the British pound:
– **Improved Growth Data:** UK GDP and PMI figures have come in above expectations, easing previous concerns over stagflation or recession.
– **Brexit Drag Fades:** Markets are less focused on Brexit aftershocks, with trade relations stabilizing and commerce with the EU showing signs of normalization.
– **Investor Positioning:** Market participants, previously heavily short sterling, have unwound those positions, adding buying interest on dips.
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## Technical Analysis: GBP/USD Holds 1.35 Support
The technical profile of GBP/USD underpins the current bullish narrative, with 1.35 acting as a crucial line of defense.
### Key Technical Zones
– **Support at 1.35:** This round number is a major psychological and technical level. Sterling’s ability to remain above this demonstrates the robustness of the rally.
– **200-Day Moving Average:** The cross above the 200-day moving average censures the previous bearish regime. This development often triggers additional algorithmic and institutional buying.
– **RSI and Momentum Oscillators:** Relative strength index (RSI) readings remain bullish but not excessively overbought, indicating further upside potential without imminent correction risk.
### Chart Patterns and Scenarios
– **Ascending Channel:** Recent price action shows an ascending channel, suggesting higher-lows and higher-highs dominate.
– **Potential Break
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