Pound Among the Winners Boosted by US Dollar Weakness and Rate Cut Prospects :: InvestMacro

By RoboForex Analytical Department 

The GBP/USD pair climbed for seven consecutive days, reaching 1.3210, before experiencing a slight dip on Thursday. This marks the longest sustained rise for the currency pair since July last year, with the pound’s strength primarily driven by a weakening US dollar.

Key factors influencing GBP/USD movements

Fundamentally, the outlook remains mixed. The UK’s Consumer Price Index (CPI) fell more than anticipated in March, with annual inflation dropping to 2.6% and services sector inflation easing to 4.7%. This has alleviated some pressure on the Bank of England (BoE), prompting markets to adjust their expectations for monetary policy easing.

Traders are now pricing in rate cuts of around 85 basis points by year-end, with the first reduction widely expected in the coming months. By December, there is a greater than 50% probability of a further cut, as slowing inflation could give the BoE more flexibility to support the economy and households amid ongoing trade uncertainties.

Technical analysis: GBP/USD outlook

H4 Chart Perspective

• The GBP/USD pair recently completed an upward wave, peaking near 1.3290
• A downward impulse is now unfolding, targeting 1.3165
• A potential rebound towards 1.3222 may follow before a possible decline to 1.2990
• This outlook is supported by the MACD indicator, where the signal line has exited the histogram area and is trending sharply downward

H1 Chart Perspective

• The pair consolidated around 1.3222 before breaking lower
• The immediate downside target is 1.2880, followed by a potential retest of 1.3222 from below
• The Stochastic oscillator reinforces this view, with its signal line below 50 and descending towards 20

Conclusion

While the pound benefits from a softer dollar and shifting rate expectations, technical indicators suggest potential near-term volatility. Traders should monitor both macroeconomic developments and key technical levels for further directional cues.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.