- The UK economy expanded by the most in almost three years in Q1.
- US data revealed a significant jump in initial jobless claims to an 8-month high.
- One more BoE policymaker voted for a rate cut.
The GBP/USD outlook shows a surge in bullish momentum as the pound strengthens after better-than-expected GDP data. At the same time, the dollar was weak after another poor employment report.
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Data on Friday showed that the UK economy expanded the most in almost three years in Q1. This ends the shallow recession experienced in the second half of 2023. The GDP expanded by 0.6% in the first quarter of 2024.
Meanwhile, data on Thursday from the US revealed a significant jump in initial jobless claims to an 8-month high. This confirmed the recent view that the labor market was cooling, leading to a sharp decline in the dollar. Moreover, the unemployment claims report came after poor nonfarm payrolls figures, revealing a bigger-than-expected drop in employment in April. Furthermore, other data showed that US jobless claims fell to a 3-year low in March.
All these reports have raised confidence in the market that the US labor market is easing. As a result, there will be less inflationary pressure, allowing the Fed to cut interest rates. For this reason, investors are back to pricing in two Fed rate cuts in 2024.
Elsewhere, the pound fell after the Bank of England policy meeting, where the central bank held rates at 5.25%, as expected. One more policymaker voted for a rate cut, indicating growing confidence that inflation will reach the central bank’s target. Moreover, Governor Bailey said he was optimistic that things were moving in the right direction.
GBP/USD key events today
- US consumer sentiment report
GBP/USD technical outlook: Bullish momentum cracks 30-SMA
On the technical side, the GBP/USD price is on the brink of breaking above the 30-SMA. Meanwhile, the RSI has crossed above 50, showing a shift in sentiment to bullish. This comes after the price failed to break below the 0.5 Fib retracement level.
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Bulls reversed the move with a bullish engulfing candle. If the price closes above the SMA, it will confirm a bullish takeover. Moreover, it would allow the price to target and retest the 1.2600 key resistance level. A break above this level would make a higher high and strengthen the bullish bias.
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Saqib Iqbal
