GBP/USD Outlook: Sterling rises on easing BoE rate cut bets

• UK retail sales rose 0.5% in July after falling 0.9% the previous month.

• UK GDP data showed an estimated 0.6% growth in Q2.

• The focus will be on Powell’s speech at the Jackson Hole symposium.

The GBP/USD outlook is bullish as the pound rises amid falling BoE rate cut expectations. On the other hand, the dollar remained weak as investors fully priced in a 25 basis point Fed rate cut in September.

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The pound has been upbeat since last week when data showed the UK economy was steady. Notably, UK retail sales rose 0.5% in July after falling 0.9% the previous month. The sales figures came after GDP data revealed an expected 0.6% increase in Q2.

A stable economy has made it less likely that the Bank of England will implement another rate cut soon. The probability of a rate cut in September fell to 37%. At the same time, investors expect 43 bps cuts in 2024. As expectations for a BoE rate cut fade, markets are fully pricing in a Fed rate cut in September.

The tide turned last week after data showed a moderate pick-up in inflation, as expected. Although the odds of a 50 bps cut have receded, traders have increased their bets on a smaller rate cut. Fed policymakers are more confident that inflation will hit the 2% target. Therefore, investors believe that they will start supporting the first reduction in September.

Consequently, all attention will be focused on the symposium in Jackson Hole, where Powell will speak. A more dovish speech will further weigh on the dollar and boost the pound. At the same time, the FOMC’s policy minutes could contain clues about policymakers’ positions on rate cuts.

Key GBP/USD Events Today

There are no key reports scheduled for today. As a result, the pound is likely to extend last week’s move.

GBP/USD Technical Outlook: Bulls target 1.3000 level

Technically, the GBP/USD price is in a steep bullish move well above the 30-SMA. At the same time, the RSI climbed into the overbought region, showing an increase in bullish momentum.

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The rally pushed the price above solid resistance comprising the 1.2900 level and 0.618 Fib. If this move continues, the price will reach the key psychological level of 1.3000. However, if the bulls run out before then, GBP/USD could pull back to retest the 30-SMA support before moving higher.

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