- The GBP/USD outlook suggests a rally in the pound following a strong close to Q2.
- A deal to lower US tariffs on certain UK industrial items took effect on Monday.
- The dollar remained weak ahead of US employment figures.
The GBP/USD outlook suggests a rally in the pound following a strong finish to the second quarter of the year. Sterling gained as the US dollar remained fragile ahead of the crucial US nonfarm payrolls report. At the same time, the dollar was weak due to an increase in bets for a September Fed rate cut.
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The pound had a solid quarterly finish, gaining about 6% against the dollar. The rally came due to trade optimism after the UK became the first country to sign a deal with the US. As a result, UK assets became the safest bet at a time of trade uncertainty.
On Tuesday, the pound resumed its two-week rally. Trade optimism remains a significant catalyst for the currency. In the previous session, a deal to lower US tariffs on certain UK industrial items took effect. At the same time, data revealed that the UK economy grew by 0.7% in the second quarter.
Meanwhile, the dollar remained weak ahead of US employment figures that could show further weakness in the labor market. Moreover, trade optimism has boosted bets for a September Fed rate cut. If the US can sign more trade deals, there will be less economic and inflation uncertainty. This would allow the Fed to lower borrowing costs.
GBP/USD key events today
- BoE Governor Bailey Speaks
- Fed Chair Powell Speaks
- ISM Manufacturing PMI
- JOLTS Job Openings
GBP/USD technical outlook: Bulls gear up for a new high
On the technical side, the GBP/USD price has resumed its rally and is retesting the 1.3750 key resistance level. The bullish bias is strong with the price above the 30-SMA and the RSI near the overbought region.
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The trend changed suddenly when bullish momentum surged near the 1.3400 key support level. Bulls made a big-bodied candle that broke above the SMA, indicating a shift in sentiment. Following that, momentum remained strong, pushing the price above the key 1.3601 resistance level.
Furthermore, the price remained well above the SMA, showing a steep rally until it got to the 1.3750 resistance level. The pause here was longer. However, bulls have regained momentum and might soon break above to reach the 1.3800 key psychological level.
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Saqib Iqbal
