GBP/USD Price Analysis: Sterling bounces back as risk appetite rises

• The BoE implemented its first rate cut last week.
• Core inflation in the UK remains high.
• US recession fears eased after upbeat employment data.

GBP/USD price analysis shows a bullish shift in sentiment as the pound recovers amid improving risk appetite. In particular, fears of a future US recession eased as data showed the labor market remained solid.

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The pound had a tough week as markets digested the Bank of England’s recent policy shift. At the same time, the declines came as investors dumped risky assets on fears that the US economy was heading for a recession.

Last week, the Bank of England cut interest rates for the first time, indicating increased confidence that inflation is on a downward trend. However, it was a close 5-4 vote, indicating that some policymakers believed rates should remain high. Core inflation in the UK has remained stubbornly high, keeping policymakers cautious. However, as US inflation eases and the Fed nears its first rate cut, other central banks are taking a more accommodative stance.

Elsewhere, US data showed jobless claims fell to an 11-month low of 233,000 last week. Meanwhile, economists had expected 240,000 claims. Jobless claims are a key indicator of the unemployment rate. The previous monthly jobs report raised fears of a recession due to rising unemployment. However, this might just be a one-time thing. Policymakers will wait to see the data before drawing conclusions about the state of the sector.

Key GBP/USD events today

Neither the UK nor the US will release high-impact data today. Therefore, the pair could end the week quietly.

GBP/USD Price Technical Analysis: Breach of 30-SMA signals a looming reversal

Technically, the GBP/USD price made a strong bullish move, placing the 30-SMA. At the same time, the RSI crossed the 50 mark, indicating a change in sentiment. The previous downtrend weakened when the price reached the key support level 1.2700. Here, the RSI made a bullish divergence, indicating exhaustion.

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Furthermore, although the price made lower lows and highs, the bulls continued to make strong candles, indicating a corrective move. At the same time, the price remained close to the SMA, avoiding large fluctuations. A reversal will allow GBP/USD to review resistance levels including 1.2800 and 1.2900.

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