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GBP/USD Weekly Forecast: BoE confident to cut rates further

  • US services sector PMI data showed expansion.
  • US jobless claims fell, pointing to a still tight labor market.
  • Sterling fell as markets eyed the Bank of England’s first rate cut.

The GBP/USD weekly forecast is slightly bearish despite the recent rally as the Bank of England appears more confident of further rate cuts.

GBP/USD Ups and Downs

Sterling had a bearish week but closed well above its lows. The pair started the week lower as investors dumped risky assets amid fears of a US recession. Data from the previous week showed a weaker-than-expected economic performance.

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However, this changed with the US services sector PMI data, which showed an expansion. Meanwhile, jobless claims fell, indicating a still-tight labor market. However, investors were already expecting a more significant Fed interest rate cut of 50 basis points in September.

In addition, sterling fell as markets eyed the Bank of England’s first rate cut.

Next week’s key events for GBP/USD

Next week, the pound could experience significant volatility due to US and UK inflation and retail sales data. In addition, the UK will release data on employment, GDP and manufacturing output. Markets will focus on reports on consumer inflation, shaping the outlook for monetary policy in the UK and US.

The Fed plans to begin its rate-cutting cycle in September. US inflation has been on a downward trend and the economy is starting to crack. Therefore, further reduction in inflation will give policymakers enough confidence to cut interest rates.

Meanwhile, the Bank of England recently implemented its first rate cut. However, most policy makers believe that core inflation remains high. However, they have gained enough confidence to start lowering their borrowing costs.

GBP/USD Weekly Technical Forecast: Bears eyeing support at 1.2620

GBP/USD Weekly ForecastGBP/USD Weekly Forecast
GBP/USD Daily Chart

Technically, GBP/USD is trading below 22-SMA with RSI below 50. Hence, bears are in control. However, the price has seen larger highs and lows on a larger scale, indicating a bullish trend.

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After breaking the 1.2800 support, the bears are now targeting the 1.2620 level. Initially, GBP/USD made a higher low at this level. Therefore, it is a strong barrier. However, if the bears break this level, the price will fall, breaking the uptrend pattern. In this case, GBP/USD would confirm a new bearish trend. On the other hand, if the level holds firm as support, the bulls could re-emerge to hit a new high.

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