- For more than two weeks, the GBP/USD price has been subject to profit-taking since testing the resistance level of 1.3044.
- The losses of the recent selling operations extended towards the support level of 1.2806 before settling around the level of 1.2835 at the time of writing the analysis.
- We await important and influential data and events from today until the end of the month and week’s trading.
- Recently, a note from Barclays Bank said: “The hawkish easing by the Monetary Policy Committee represents an opportunity for the pound,” ahead of the Bank of England’s eagerly awaited monetary policy decision on August 1.
Barclays economists expect the Bank of England to pull the trigger on the easing cycle on Thursday, based on “the stated preference in June by the core of the Monetary Policy Committee to start easing soon.”
The rule of thumb is that a rate cut could weigh on the pound. Indeed, we have seen the British currency come under pressure over the past five days as market expectations for a gradual rate cut have risen to nearly 60% at the time of writing. In theory, a cut would require the spread (around 40%) to be priced into the pound, which would mechanically lead to further declines.
On the stock exchange front, UK stocks closed lower. The FTSE 100 index fell by around 0.2% to close at 8,274.4 points on Tuesday, retreating from a two-month high on Monday, as traders weighed mixed corporate earnings and braced for policy decisions from both the Federal Reserve and the Bank of England. On the trading front, ConvaTec shares led the losses, falling 5.8% after it missed earnings expectations, despite reaffirming its medium-term outlook. Diageo shares continued to face pressure as it posted its first annual sales decline since 2020. Accounting software company Sage fell even after maintaining its guidance and delivering revenue growth in line with expectations for the first nine months of the year. Croda shares also fell after cutting its full-year earnings forecast, while BP reversed strong early gains to close lower on lower oil prices. Conversely, Standard Chartered rose about 6% after announcing a multi-billion dollar share buyback programme, helped by strong second-quarter results.
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On the most important event for the sterling dollar pair today:
The US Federal Reserve is expected to keep the federal funds rate at a 23-year high of 5.25%-5.50% for an eighth consecutive meeting in July 2024. However, policymakers are likely to signal a possible US rate cut in September amid signs of slowing inflation and a strong but sluggish labour market. In June, annual inflation fell to 3%, its lowest since June 2023, while the core rate hit its lowest in more than three years at 3.3%. The annual personal spending rate also fell to 2.5% from 2.6%. The core personal spending rate, the central bank’s preferred inflation gauge, remained at 2.6%, well below its 2022 peak. In addition, the unemployment rate hit a 2021 high of 4.1%, payrolls slowed, and layoffs rose.
Technical forecasts for the GBP/USD pair today:
According to the performance on the daily chart below, the general trend for the GBP/USD price is still bearish and breaking the support at 1.2800 will strengthen the bears’ control and thus prepare for stronger losses, followed by 1.2720 and then the psychological support at 1.2600 respectively. On the other hand, the psychological resistance of 1.3000 will remain the most important to make a change in the general trend to an upward one. All this will depend on the reaction of the markets and investors to the signals of the US Federal Reserve today, then the announcement of the Bank of England tomorrow, ending with the announcement of the US employment numbers at the end of the week.
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