Home GBP/USD Forecast: Surprise Halt in Debt Ceiling Aiding GBP Bids

GBP/USD Forecast: Surprise Halt in Debt Ceiling Aiding GBP Bids

  • The surprising halt in US debt ceiling negotiations hurt the dollar.
  • Fed Chair Jerome Powell indicated a preference to slow down rate hikes.
  • Asking prices for British homes experienced a significant increase in May.

Today’s GBP/USD forecast is slightly bearish. This is because the dollar made a modest recovery on Monday from its decline on Friday, which saw the pound decline. Two factors influenced the dollar’s drop on Friday. These are the surprising halt in US debt ceiling negotiations and Fed Chair Jerome Powell’s indication of a preference to slow down rate hikes. 

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Investors eagerly anticipate a crucial meeting between US President Joe Biden and House Republican Speaker Kevin McCarthy. The two will try to address the debt ceiling issue on Monday.

The negotiations between the two parties abruptly broke off on Friday, with Republican negotiators leaving the meeting. However, talks eventually resumed, but neither side reported any signs of progress. Consequently, the dollar experienced a downward movement.

Property website Rightmove reported that in May, asking prices for British homes experienced the highest increase of any month this year. This growth was driven by an improved economic outlook and more stable mortgage rates. This consequently counterbalanced the effects of the Bank of England’s interest rate hikes. 

Earlier this month, UK’s central bank raised the Bank Rate by a quarter-point to 4.5% because of the 10.1% inflation rate recorded in March.

According to Rightmove’s findings on Monday, the average price of homes entering the market surged by 1.8%, equivalent to £6,647 ($8,389.18), compared to April. This rise exceeded the average increase observed in May, which stood at 1.0%.

GBP/USD key events 

GBP/USD will likely consolidate as no key releases are coming from the UK or the US. Investors will watch for developments in the US debt ceiling talks. 

GBP/USD technical forecast: Bears resurface at the 30-SMA resistance.

GBP/USD technical forecast
GBP/USD technical forecast chart

GBP/USD is bouncing lower after finding strong resistance at the 30-SMA. The bias in the 4-hour chart is bearish because the price makes lower highs and lower lows. 

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Furthermore, the RSI has consistently traded below 50, respecting it as a resistance level. This shows that bears have solid momentum. The next hurdle for bears is at the 1.2401 support level. The downtrend will continue with a break below this support, and the bearish bias will stay as long as GBP/USD stays below the 30-SMA.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.