- The British pound continued to decline to below $1.26, as a strong US jobs report raised expectations that the Federal Reserve will deliver fewer rate cuts this year compared to the Bank of England.
- According to forex trading platforms, the GBP/USD currency pair fell to the support level of 1.2574 last Friday, giving up the gains of the week that reached 1.2683 and started trading this important week stable around 1.2625.
- We are waiting for important data and events that will strongly affect the course of the currency pair.
According to the results of the economic calendar data, the latest data showed that the US economy added a total of 303,000 jobs in March, the largest increase in 10 months and significantly exceeding market expectations of an increase of 200,000. In addition, the unemployment rate in the country unexpectedly fell to 3.8%, while wage growth remained strong.
As a result, financial markets are currently pricing in about 70 basis points of rate cuts in Britain this year, especially after two of the most hawkish Bank of England members dropped their calls for a rate hike at the last meeting. This week in Britain, GDP figures on Friday are likely to confirm a second month of growth in February, putting the economy on track for a moderate recovery after a shallow recession in 2023. On that day, the Bank of England will release a report setting out recommendations on how officials can improve forecasting and communication after criticism that they were slow to recognize the inflation crisis that began after the pandemic.
Overall, MUFG Bank still expects US inflation data to be decisive and additive; "The releases this week of the latest US Consumer Price Index and Producer Price Index reports for March are likely to be more important for Fed rate cut expectations and the US dollar direction over the rest of this month."
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HSBC Bank similarly pointed to market risk sentiment, stating, "Strong consensus beating could extend to 'risk' currencies. Naturally, inflation data this week will also be useful – perhaps more so – as the risk perspective needs to see evidence of falling inflation amidst recovery in growth. However, according to IG Bank, "It is unlikely that the very high sensitivity of the dollar and the forex market towards US data will fade." Additionally, Bank of America still expects pressure on the US dollar. They stated, "Despite the US's flexibility so far, we still assume that the US economy will start slowing down this year, in line with our economic experts' expectations."
Regarding the United Kingdom, the Construction Purchasing Managers' Index rose to 50.2 for March from 49.7 previously, marking the strongest reading since August 2023.
GBPUSD Expectations and Analysis Today:
Based on the performance of the daily chart, continued movement of the GBP/USD pair below the support level of 1.2600 will support bearish control of the trend, thus preparing for stronger losses. Especially, if the US dollar gains strong positive momentum from the announcement of US inflation figures and the content of the minutes of the latest Federal Reserve meeting. If this happens, it will be a strong opportunity for bears to move towards support levels of 1.2570 and 1.2490, respectively. From the latter level, technical indicators will begin to move towards strong oversold levels.
On the other hand, as mentioned before, the 1.2775 resistance will remain the most important for bullish control initiation. Ultimately, we expect the GBP/USD price to remain under downward pressure until reacting to the results of important US data.
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