- For the second day in a row, the GBP/USD price is trying to rebound higher, but its gains did not exceed the 1.2698 level, which is stable near it at the time of writing the analysis.
- Concurrently, the currency pair is trying to recover from the losses of the downward shift that pushed it towards the 1.2622 support level, its lowest in six weeks.
- Clearly, the latest downward move came as investors assessed the monetary policy and political future of Britain.
Last week, the Bank of England (BoE) kept interest rates unchanged, raising hopes for a rate cut in August after comments from policymakers. Also, the local inflation reports showed that the headline inflation rate fell to the BoE target of 2%. Moreover, the upcoming GDP figures will provide more economic insight, after strong retail sales data on Friday tempered some of the optimism from the BoE comments.
Meanwhile, the so-called “Gamblegate” scandal involving aides to UK Prime Minister Rishi Sunak betting on the election date has caused major political turmoil and threatens to overshadow the rest of the campaign, with Labor expected to win by a wide margin.
What is the GBP/USD forecast for this week?
We believe that GBP/USD exchange rate will remain vulnerable to further weakness, but Friday could see a rebound if the core inflation reading comes in weak. GBP/USD has entered a short-term downtrend against the USD, but we look for a slight rebound in the coming days if key support holds. The Forex trading chart above shows GBP/USD falling to meet the 100-day moving average at 1.2639, which seems to have halted the selling seen last week and could provide further support in the coming days.
Currently, the 50-day moving average is also in this vicinity, suggesting a confluence of some key technical levels that could create the basis for a slight rebound towards 1.27. Psychological support at 1.2600 will remain important for continued selling pressure. For the rebound story to develop, we need to see a couple of positive daily closes on Monday and Tuesday to confirm that nearby support levels are holding.
Technical forecasts for the GPB/USD pair today:
From a GBP/USD forecast today point of view, overall, at current levels, the pound is testing potential support in the form of the 50-day moving average, but if that gives in, we could see a bounce back to around 1.25, last month’s low. At the moment, strength will be shallow and limited as the daily RSI is at 43 and pointing down in recognition of the recent bearish momentum that has built up. Technically, a break below the aforementioned 100 DMA would be a technical deterioration and confirm a deeper downtrend is building.
Moving to the economic calendar, it is a quiet week in the UK, but there should be some interest from the US. Concurrently, all eyes will be on the US Core Personal Consumption Expenditures (CCE) release on Friday, which is seen as important for the US Federal Reserve when considering interest rate expectations. Also, the Core PCE rate is expected to come in at 0.1% MoM and 2.6% YoY. If it beats expectations, expect the dollar to end the week at a higher level, with the pound likely to end the week at its lowest level since mid-May. However, if the data is lower than expected, we could see a nice rally in GBP/USD, stabilizing the near-term outlook. However, the strength is likely to be limited in nature as the US dollar appears to be benefiting from the continued outperformance of the US equity market. Ultimately, Credit Agricole believes that the outperformance of US equities could continue to attract unhedged international capital flows into US equity markets, supporting the US dollar.
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