The British pound experienced some relief as the US dollar weakened today. The focal points for the day are the US GDP report and speeches from Federal Reserve officials. The pound is finding support at the 1.21 level against the dollar. From a Bank of England perspective, market expectations for rate cuts have been adjusted to a lesser extent by December 2024. The close vote split between hike and pause during the recent Bank of England meeting keeps the possibility of subsequent rate hikes open. The forecast for peak rates between the Fed and the Bank of England is similar, but could shift in favor of the pound if the US shows signs of economic weakness and the UK displays resilience in its economic data.
In terms of technical analysis, the daily chart for GBP/USD shows that bulls have been defending the psychological level of 1.2100, and the pair is trading in oversold territory according to the Relative Strength Index (RSI). However, this turnaround may be short-lived as fundamental factors favor the US dollar. GBP/USD faces key resistance and support levels.
Retail traders are currently net long on GBP/USD, with 71% of traders holding long positions. It is also important to monitor market sentiment and positional changes to gain insights into the outlook for GBP/USD.
In conclusion, the weaker dollar provided some relief for the pound, but the focus remains on US GDP and Federal Reserve speeches. The Bank of England’s monetary policy stance and market expectations for rate cuts will play a role in shaping the pound’s future performance. Technical analysis suggests that while there may be a short-lived turnaround, fundamentals favor the US dollar. Monitoring market sentiment and positional changes can provide further insights into the outlook for GBP/USD.