**GBP/USD Extends Gains for Fourth Consecutive Day as Investors Watch BoE Rate Outlook**
*By ActionForex.com Contributor*
The GBP/USD currency pair has continued its rally, marking four straight days of gains, amid shifting sentiment around the Bank of England’s (BoE) monetary policy outlook. After months of choppy performance, the pair is trading with enhanced bullish momentum, signaling traders’ recalibrated expectations regarding British interest rates. Market participants are parsing through economic data, central bank commentary, and changing risk sentiment as they await further cues from the BoE.
### Recent Performance Overview
– GBP/USD climbed consistently, benefitting from US dollar softness and persistent optimism regarding the UK’s economic resilience.
– The pair began the week rebounding from below 1.2700 to cruise above 1.2750, trading with an undertone of confidence not seen since late May.
– Positive price action is notable, especially given the US Federal Reserve’s hawkish tone and resilient US data that might have otherwise boosted the dollar.
### Catalysts Behind the GBP/USD Uptrend
Several factors have contributed to the GBP/USD’s latest upward surge. Understanding these drivers is vital for traders:
#### 1. Shifting BoE Rate Expectations
– UK inflation, though cooling, remains above the BoE’s 2 percent target.
– Strong wage growth and persistent service sector inflation pressure policymakers to maintain a watchful stance.
– Market-implied probabilities now discount a BoE rate cut before September, with many analysts only expecting a first move to ease policy toward year-end.
– For comparison, other major central banks such as the ECB and SNB have already delivered rate cuts, increasing the pound’s relative attractiveness.
#### 2. UK Economic Resilience
– UK GDP reported a small contraction in April, but underlying data suggest economic activity is steadier than many had predicted at the year’s start.
– Jobs data for April, released last week, showed a robust labor market, with average earnings excluding bonuses climbing 6.0 percent annually.
– Unemployment ticked up marginally, but the figures imply continued labor market tightness, a scenario likely to keep inflation above target.
– Retail sales and PMI indicators also surprised to the upside, indicating both consumer and business strength.
#### 3. US Dollar Weakness
– The US dollar index (DXY) retreated from recent highs on softer inflation data and signals that the Fed is open to considering policy cuts if disinflation persists.
– Mixed US macroeconomic reports, including jobs and housing data, blunted the dollar’s rally.
– Treasury yields have stabilized, further easing upward pressure on the greenback.
#### 4. Risk Sentiment and Global Backdrop
– Easing geopolitical tensions and calmer equity markets have buoyed risk-sensitive currencies such as the pound.
– Rising investor appetite for higher-yielding assets has also supported GBP/USD.
### Technical Analysis: GBP/USD Outlook
From a technical perspective, the GBP/USD pair shows robust bullish momentum. Here’s a breakdown:
#### Daily Chart Highlights
– Price remains above major moving averages, including the 50-day and 100-day simple moving averages (SMA).
– The pair recently validated a breakout above the 1.2710 resistance area, which now acts as support.
– Relative Strength Index (RSI) hovers in neutral-to-bullish territory, just below overbought levels, suggesting further upside is possible before a corrective pullback.
#### Key Levels to Watch
– **Immediate Support:** 1.2710 and the 1.2670 region are pivotal to maintaining near-term bullish structure.
– **Near-Term Resistance:** The next upside test is at 1.2800, a psychological and technical barrier. A daily close above this could propel gains toward 1.2850 and beyond.
– **Broader Range:** While short-term momentum is bullish, GBP/USD will need to establish a solid foothold
Read more on GBP/USD trading.