Original article credit: TradingNews.com, “GBP/USD Price Forecast: Sterling at 1.3556 With Fed Cut Bets Driving Upside”
GBP/USD Price Forecast: Bullish Momentum Builds Amid Fed Rate Cut Bets
The British pound has recently gained significant ground against the US dollar, with the GBP/USD currency pair climbing to 1.3556. This upward momentum is heavily supported by renewed speculation that the US Federal Reserve may begin cutting interest rates in the near future. As investors continue to weigh soft economic data from the United States against hawkish comments from UK policymakers, the outlook for Sterling appears more optimistic.
This extended forecast explores the dynamics behind the recent rise of the GBP/USD exchange rate, key economic indicators driving the pair, and what traders and investors should anticipate in the coming weeks.
Pound Strength Driven by Weak US Economic Data
Recent developments in US macroeconomic indicators have been pivotal in shifting market sentiment. A series of weaker-than-expected data points have sparked speculation that the Federal Reserve may adopt a more dovish stance sooner than previously expected.
Among the most impactful data:
– US labor market reports showed slowing job growth in recent months. While employment figures remain relatively strong, the pace of job additions has moderated.
– ISM Manufacturing and Services PMI (Purchasing Managers’ Index) reports revealed contractions in both sectors. These are seen as leading indicators of economic health and are watched closely by policymakers.
– Inflation readings have continued to soften. While still above the Federal Reserve’s long-term target of 2%, recent Consumer Price Index (CPI) reports indicate inflationary pressure may be easing.
– Retail sales data showed signs of consumer fatigue, posing further concerns about economic resilience.
As these reports emerge, traders are increasingly pricing in the possibility of an interest rate cut from the Fed sooner rather than later. Fed Funds Futures are indicating a high probability of at least one rate cut before the end of the year. The dovish tilt in US monetary policy expectations exerts downward pressure on the dollar, creating room for currency pairs like GBP/USD to rise.
Bank of England Holds Steady, Supports Sterling
While the US central bank appears to be leaning toward a more accommodative policy outlook, the Bank of England (BoE) continues to express caution regarding rate cuts. Positive economic performance in the UK, coupled with persistent inflation concerns, have led BoE officials to maintain a tightening bias.
Key factors strengthening the pound:
– UK inflation, although moderating, remains one of the highest among G7 economies. This puts pressure on the BoE to maintain a restrictive policy stance.
– BoE Governor Andrew Bailey and other key policymakers have emphasized the need to see “sustained evidence” of inflation falling toward target before considering rate cuts.
– The UK labor market remains tight, with low unemployment and steady wage growth. Such conditions further support the case for holding rates steady or even hiking again if inflation pressures resurface.
– GDP figures and business sentiment indices from the UK indicate moderate but stable economic expansion, which boosts confidence in the currency.
The divergence in policy paths between the BoE and the Fed widens the yield differential in favor of GBP, drawing investor flows toward Sterling.
Technical Analysis: GBP/USD Encounters Resistance at 1.3556
The recent rally in GBP/USD has positioned the currency pair near critical resistance zones. Technical traders are closely monitoring key levels to determine the strength and longevity of this bullish breakout.
Key technical observations:
– Intraday charts show strong upward momentum with higher highs and higher lows forming consistently over the past few sessions.
– The 1.3556 mark is a psychological resistance zone that had previously acted as a barrier during earlier rallies in the past year.
– The Relative Strength Index (RSI) had entered overbought territory on 4-hour and daily charts, suggesting the potential for a short-term pullback or consolidation.
– Moving average convergence has been supportive of further gains, with both the 50-day and 200-day simple moving averages
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