- GBP/USD is expected to extend its journey towards the top end of its 2024 range in the coming days, but a strong US PCE inflation reading at the end of the week could turn the tide.
- Recently, GBP/USD rose to a resistance level of 1.2777, its highest in over two months, and is holding onto its gains at the time of writing.
- Overall, GBP/USD maintains a bullish technical setup against the USD, supported by the broader USD pullback and last week's above-consensus inflation reading that quashed June rate cut expectations at the Bank of England.
The decline followed expectations of a rate cut from the Bank of England amid stable expectations from the central bank elsewhere, pushing the pound to the top of the scoreboard for 2024. Overall, the technical momentum lies in the sterling price, and further gains against the dollar are the preferred position. Momentum is considered constructive, with the exchange rate above the important moving average levels that we see when making our forecasts for this week. Also, the Relative Strength Index calls for further gains as it reaches 65 and points upward. We look forward to the pound sterling against the US dollar testing the 1.28 level in the coming days before a final move towards its highest level for 2024 at 1.2893.
Overall, there are no major economic releases due from Britain this week, which, if anything, could support the continued supportive narrative regarding the pound. Similarly, it puts the onus on the US dollar to change the upward trend of the British pound. With this in mind, Thursday's US GDP numbers will be noteworthy, with the market eyeing a 1.5% annualized reading in the first quarter.
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Technical forecasts for the GPB/USD pair today:
Any stronger than expected reading could strengthen the price of the US dollar because it will support the view that the Federal Reserve is in no hurry to lower US interest rates. However, arguably more important than the GDP reading is the part that details personal consumption, as this is an effective measure of inflation at the personal level. Furthermore, the market expects personal consumption to reach 2.1% on an annual basis in the first quarter.
Next Friday brings the release of the PCE inflation deflator, which many economists like to point to as the Fed's preferred measure of inflation. Clearly, a strong beat of expectations (2.8% annualized) could send the USD into the weekend and reverse GBP/USD's gains, making it the main near-term risk to watch out for.
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