GBP/USD hits 31-month high, pound’s rally extends

• GBP/USD hit a new multi-year high on Thursday.
• Despite the lack of UK data, GBP continues to rise.
• Better-than-expected US data keeps short pressure on the Greenback high.

The GBP/USD currency pair hit a 31-month high of 1.3434 on Thursday, marking a significant milestone in its upward trajectory. This increase was driven primarily by widespread selling of the US dollar, supported by improved economic indicators that eased concerns about a potential economic slowdown.

The data file remains light on the UK side for the rest of the week and cable traders will be forced to sit on their hands and wait for GBP-centric data to come next week, starting with the UK Gross Domestic Product (GDP) figure scheduled for Monday.

The Federal Reserve’s recent decision to cut interest rates by 50 basis points has raised concerns in global markets, with some investors fearing the drastic move would be a response to an impending economic recession in the US. However, Fed Chairman Jerome Powell clarified that the rate cut was a proactive measure aimed at supporting the US labor market, rather than a reactive response to signs of recession.

Positive data on US durable goods orders and initial weekly jobless claims further strengthened the Fed’s stance, with both indicators beating expectations. The narrative of a “soft landing” for the economy remained intact. The upcoming release of Personal Consumption Expenditure (PCE) inflation data on Friday will serve as a litmus test for assessing the impact of the Fed’s recent interest rate cut.

In August, US durable goods orders stagnated at 0.0% month-on-month, below the previous month’s sharp increase but still beating estimates of a 2.6% contraction. In addition, initial jobless claims for the week ended September 20th showed a decline to 218K, beating expectations of 225K and down from the revised 222K figure the previous week.

GBP/USD Price Forecast

GBP/USD, also known as Cable, has been consistently hitting multi-year highs and there are few significant technical obstacles in the way for sterling bulls. However, the strong upside momentum has left GBP/USD vulnerable to a possible downward correction as market dynamics come into play. If there is a significant increase in selling pressure in the current price region, it could easily push the price below the key support level at 1.3100 and towards the 50-day EMA at 1.3076.

GBP/USD Daily Chart