- The dollar was on the front foot after Powell’s hawkish speech.
- BoE policymaker Jonathan Haskel said he would need more evidence that inflation was cooling.
- The US and the UK will release major reports featuring inflation and retail sales.
The GBP/USD weekly forecast has a neutral stance as both the pound and the dollar are strengthening due to a decline in rate-cut expectations.
Ups and downs of GBP/USD
Although the pound fell last week, it retraced most of that move by Friday. At the start of the week, the dollar was on the front foot after Powell’s hawkish speech. Notably, Powell took another chance to emphasize that the Fed will not cut rates until inflation is on a clear path to the 2% target. As a result, the probability of a March rate cut fell to 16.5% from 65.9% a month ago.
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Additionally, upbeat data from the US, including service sector business activity and jobless claims, supported the dollar. However, on Friday, the pound strengthened. BoE policymaker Jonathan Haskel said he would need more evidence inflation was cooling before changing his hawkish stance.
Next week’s key events for GBP/USD
The US and the UK will release major reports featuring inflation and retail sales. Investors will watch the US consumer and producer inflation and retail sales reports. Traders will get clues on the outlook for the Fed’s monetary policy. A drop in inflation could bring back bets for a March rate cut. Meanwhile, high inflation will likely leave no chance that the Fed will hike in March.
Similarly, the UK inflation and the sales reports will show the state of the UK economy. Consequently, there might be a shift in the outlook for rate cuts in the UK.
GBP/USD weekly technical forecast: Trend reverses as bearish RSI divergence plays out
The GBP/USD trend has reversed to the downside after reaching the 1.2800 key resistance level. Bulls weakened when the price approached the 1.2800 level. As a result, the RSI made a bearish divergence. As bullish momentum faded, bears got stronger and pushed below the 22-SMA support.
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At the moment, the price is pulling back and might retest the 22-SMA as resistance before continuing lower. However, before lowering the price, bears must face the 1.2500 support level. A break below this level would allow the price to retest lower support levels like 1.2080.
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