- GBP/USD surges to its highest level since March as US inflation cools.
- According to reliable trading platforms, the dollar was sold off across the board and equity markets rallied after US inflation came below expectations.
- GBP/USD rose to resistance at 1.2860, the highest for the pair in three months, and is hovering around 1.2795 at the start of trading on Thursday.
According to the results of the economic calendar, the news reported that the US consumer price index was at 0.0% on a monthly basis in April, according to the Bureau of Labor Statistics, down from 0.3% in March and below the consensus forecast of 0.1. Also, the core CPI inflation reading fell to 0.2% from 0.3%, below the 0.3% forecast and the lowest reading since 2021.
Overall, this data increases the likelihood of a Fed rate cut, which is typically supportive of risk appetite (good for stocks) but a headwind for the US dollar. Now, markets are pricing in two rate cuts in 2024, starting in September, followed by another 25bp cut in December. Moreover, the inflation figures come just hours before the Fed’s policy update and reduce the chances of the Fed taking a “hawkish” tone, meaning one that retreats from expectations of rate cuts.
The steady headline US inflation reading was driven by lower gasoline prices, while core inflation slowed thanks to a halt in a strong wave of auto insurance price hikes. However, shelter remains a driver of inflation, rising 0.4% monthly, making housing costs the largest contributor to overall inflation pressures.
On the global central bank policy front, the US Federal Reserve left its target range for federal funds unchanged at 5.25%-5.50% for the seventh consecutive meeting in June 2024, in line with expectations. Furthermore, policymakers do not expect it will be appropriate to cut US interest rates until they gain greater confidence that inflation is moving sustainably toward 2%.
In the meantime, the dot plot showed that policymakers see only one US rate cut this year and four cuts in 2025. In March, the Fed was looking at three cuts in 2024 and three in 2025. Moreover, the Fed made no adjustments to its GDP growth forecasts and still sees the economy expanding by 2.1% in 2024, 2% in 2025, and 2% in 2026.
Meanwhile, PCE inflation was revised higher for 2024 (2.6% vs. 2.4% in March forecast) and next year (2.3% vs. 2.2%) but remained at 2% for 2026. Also, core PCE inflation was revised to 2.8% in 2024 (vs. 2.6%) and 2025 (2.3% vs. 2.2%) but was kept at 2% for 2026. Ultimately, the US unemployment rate is expected to reach 4% for 2024, as forecast in March, but is expected to edge up slightly to 4.2% in 2025 (vs. 4.1%).
Top Forex Brokers
Technical forecasts for the GBP/USD pair today:
According to the performance on the daily chart attached, the price of the British pound against the US dollar GBP/USD is on an upward rebound path. As we mentioned before, breaking resistance 1.2775 will support more bull control, and it is now at the next station for the rise, and the general upward trend will be crowned by moving towards the psychological resistance 1.3000. On the other hand , the support level 1.2600 will remain the most important to confirm the strength of the downward trend and the collapse of the current upward attempts.
Ready to trade our GBP/USD daily analysis and predictions? Here are the best forex trading platforms UK to choose from.