- The pound sterling fell towards $1.23, reaching its lowest level since mid-November, as investors recalibrated their expectations for the timing of the Bank of England's first rate cut after cautious comments from Deputy Governor Dave Ramsden.
- Recently, Ramsden suggested that the risk of UK inflation remaining excessively high might have diminished and could fall below the BoE's latest forecasts.
- GBP/USD is trading around 1.2345 as of writing.
This statement came shortly after BoE colleague Megan Greene warned against considering a rate cut, citing recent economic data showing rising wage growth and services price inflation in Britain. Markets now expect the first borrowing cost cut to occur at the August meeting, compared to September previously expected, with the possibility of an early adjustment as early as June. Meanwhile, the US dollar held its ground, supported by hawkish comments from Fed officials.
According to the platforms of Forex currency trading companies., It is expected that the exchange rate of the pound against the dollar will recover from its recent losses in this week’s trading, with focus on the Purchasing Managers’ Index data in Britain and the personal consumption expenditure inflation numbers in the United States. Recently, the price of the British pound fell by 2.30% against the US dollar in just eight trading days, a relatively rapid movement that brings the GBP/USD pair close to oversold levels. We expect these oversold conditions to fade in the short term.
Technical forecasts for the GBP/USD pair today:
According to the performance on the daily chart below, the Relative Strength Index is approaching oversold conditions near 30, and we are looking forward to some moderate rebound in this indicator, which will lead to a rise in the exchange rate of the British pound. Strong support for GBP/USD around resistance 1.2410 this week and gains across 1.2472 should pave the way for more technical strength in the pound in the short term (towards 1.2540/50). Obviously, the British pound price is struggling to rise, supported by correction of short-term RSI signals from oversold levels.”
For now, rebounds are likely to be relatively short-lived, so the option is one that only covers a few days. The chances of further decline in the exchange rate remain high, as it remains below the 200-day moving average. Only when the pound breaks above the 200-day moving average again, currently at 1.2572, can we call it an uptrend.
Briefly, we are a long way from such a development, as it would require a string of weak US data to reverse the fortunes of the forex market.
In general, the pound sterling could rebound against the US dollar in this week’s trading if the US economic growth numbers, scheduled to be released on Thursday, are less than the agreed-upon expectations for an annual growth rate for the first quarter of 2.3%. A hot reading will only exacerbate the dollar's rise, but given the size of the recent gains, we believe a larger move in the FX market will follow a disappointing number.
According to the results of the economic calendar data, The GDP reading is likely to have a short-term impact on the FX markets. Instead, the highlight of the week for the US dollar will be the PCE inflation reading on Friday. Moreover, Economists like to point out that this is the Fed's preferred inflation, although evidence from 2024 suggests the Fed is firmly focused on the hot increases seen in the headline CPI inflation rate. However, the PCE numbers could have a market impact on any deviation from the 0.3% monthly growth that the market expects. Once again, we expect the biggest reaction in the Forex market to come after a drop in numbers as this will provide markets with a cover to book profits on the recent strength of the US dollar.
In the meantime, the pound could be volatile today, Tuesday, with the release of the April PMI survey, the latest release of key economic data that will give guidance on how the economy is starting the first quarter. The figure to watch is the services PMI, where the consensus is looking for a reading of 53. Anything less than this could extend the recent bearish tone in the pound.
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