- Investors reduced their expectations of a Federal Reserve interest rate hike this month.
- Market expectations now indicate a roughly 38% probability of a 25bps rate increase.
- Britain faces a more significant inflation issue than the US and the Eurozone.
Today’s GBP/USD forecast is bullish. The pound rose as investors reduced their expectations of a Fed interest rate hike this month. However, the US House of Representatives supported the greenback by approving a bill to suspend the $31.4 trillion debt ceiling.
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Following the House’s decision, attention shifted to the Democratic-led Senate, which will determine the bill’s fate just days before the federal government faces the risk of running out of funds to meet its obligations.
Meanwhile, Federal Reserve officials, including the vice chair-designate, indicated the likelihood of skipping a rate hike in June. This approach allows the central bank to assess the impact of its current tightening measures in the face of persistent inflation data.
According to the CME FedWatch tool, market expectations now indicate a roughly 38% probability of a 25bps rate increase at the upcoming Fed meeting, compared to nearly 67% the previous day.
Elsewhere, Bank of England policymaker Catherine Mann stated that Britain faces a more significant inflation than the United States and the Eurozone.
She highlighted that core inflation in the UK is being influenced by the ability of British businesses to implement price hikes and the rise in wages. Additionally, she noted that headline inflation in Britain had declined slower towards the core rate compared to other regions.
GBP/USD key events today
Investors are expecting a lot of significant news releases from the UK and the US. The UK will release its manufacturing PMI for May. On the other hand, America will release employment data and the ISM manufacturing PMI report.
GBP/USD technical forecast: Bulls take over, eyeing the 1.2475 resistance.
On the charts, GBP/USD has reversed direction and is now heading higher. After breaking above the 30-SMA, the price pulled back to retest it and the 1.2350 support level. The price is now bouncing higher and might soon retest the 1.2475 resistance level.
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Furthermore, the RSI trades well above 50, indicating strong bullish momentum. If bulls can break above the 1.2475 resistance level, the price will likely rise to the next resistance at 1.2550.
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Saqib Iqbal
