- The greenback was on the back foot as traders positioned themselves ahead of the FOMC policy meeting.
- Economists predict a 0.2% decline in US retail sales.
- Forecasts show that UK consumer inflation might hold at 2.2%.
The GBP/USD price analysis indicates continued strength as the pound climbs to new highs while the dollar falls due to a surge in bets for a 50-bps Fed rate cut. At the same time, market participants eagerly anticipate UK inflation data and the Bank of England policy meeting.
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On Tuesday, the greenback was on the back foot as traders positioned themselves ahead of the FOMC policy meeting. Futures show a higher chance of a 50-bps rate cut than a 25-bps rate cut. This shift in expectations came on Friday after dovish reports from major US news outlets. At the same time, a retired Fed official said there was a strong case for a significant rate cut on Wednesday.
However, this outlook might change again after the US retail sales report. Economists predict a 0.2% decline in sales. A bigger-than-expected drop in sales could bolster bets for a massive cut, further weighing on the dollar. On the other hand, if sales come in higher than expected, bets for a smaller cut will increase. In this case, the dollar would climb.
Meanwhile, in the UK, market participants are waiting to see the state of inflation. According to forecasts, consumer inflation might hold at 2.2%. However, the core rate might increase. Currently, the market expects the Bank of England to keep rates unchanged. Nevertheless, rate cut expectations have risen, with the likelihood of a 25-bps cut climbing from 20% to 38%.
GBP/USD key events today
- US core retail sales m/m
- US retail sales m/m
GBP/USD technical price analysis: Bulls breach 1.3200 level
On the technical side, the GBP/USD price has broken above the pivotal 1.3200 level. The bullish bias is strong since the price sits well above the SMA. At the same time, the RSI trades near the overbought region.
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Notably, the last time the price reached the 1.3200 resistance, bears quickly took over with a massive candle. Furthermore, the RSI did not enter the overbought region. However, this time, bullish momentum is stronger. Therefore, the price might soon reach the 1.3301 level.
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Saqib Iqbal
