- The dollar surged to a four-week high against its major counterparts.
- US private payrolls grew more than anticipated in July.
- The Bank of England will likely boost interest rates to a 15-year high of 5.25% from 5%.
Today’s GBP/USD forecast is bearish. On Thursday, the dollar surged to a four-week high against its major counterparts. Investors ignored the US credit rating downgrade, raising concerns about the country’s fiscal future. Instead, the currency received a boost from robust private payroll data.
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Data released on Wednesday revealed that US private payrolls grew more than anticipated in July. Consequently, the dollar rose, indicating continued strength in the labor market. US Treasury yields remained elevated as the prospect of higher rates persisted, with the 10-year Treasury yield reaching a nearly nine-month peak of 4.1360%.
Vishnu Varathan from Mizuho Bank noted that the strong ADP numbers, considered a gauge of non-farm payrolls, significantly influenced US Treasury yields and the dollar. Moreover, the highly anticipated US nonfarm payroll report will come out on Friday.
Interestingly, Fitch’s US credit rating downgrade led to some safe-haven buying, paradoxically lending support to the dollar.
In response to the stronger dollar, sterling depreciated ahead of the Bank of England’s upcoming monetary policy decision. The central bank will likely boost rates to a 15-year high of 5.25% from 5%.
Initially, market expectations for the peak Bank Rate in the UK reached 6.5% on July 11, driven by data showing record wage growth. However, these expectations dropped to 5.75% after a significant decrease in consumer price inflation.
GBP/USD key events today
There will be important economic reports from the US, including PMI data and initial jobless claims. However, the main focus will be the Bank of England’s policy meeting and rate decision.
GBP/USD technical forecast: Pound hits lower lows below 1.2775.
On the charts, GBP/USD has made lower lows after breaking below the 1.2775 support level. Bears have asserted dominance by pushing the price down to the 1.2700 support level. At the same time, this has seen the price fall lower below the 30-SMA and the RSI to the oversold region.
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The downtrend is likely to continue, given such a strong bearish bias. However, we might see the price pause at 1.2700 before breaking below.
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