GBP/USD Outlook: Dollar Strength Returns Amid Bank Earnings

GBP/USD Outlook: Dollar Strength Returns Amid Bank Earnings

  • Strong US banking results reinforced expectations of a hawkish Fed.
  • Morgan Stanley posted first-quarter earnings that exceeded forecasts.
  • The market is starting to price out a Fed cut this year.

Today’s GBP/USD outlook is bearish. Strong US banking sector’s earnings reinforced expectations that the Federal Reserve will maintain its tight monetary policy for longer. The US dollar held gains on Thursday as a result.

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After the collapse of two US banks last month, there were concerns that the crisis might worsen. On Wednesday, Morgan Stanley posted first-quarter earnings that exceeded forecasts, adding to the positive results from other large US bankers. This helped ease crisis worries.

Sim Moh Siong, a currency analyst at the Bank of Singapore, stated that the banking numbers continue to show that the US bank funding situation is stabilizing. The market is starting to price out a Fed cut this year, boosting the dollar. We also have slightly hawkish Fed talk.

According to economists surveyed by Reuters, the US central bank will raise interest rates one last time by 25 basis points in May before keeping them unchanged for the remainder of 2023.

According to Fed Bank of New York President John Williams, inflation is still high, and the American central bank will take action to reduce it.

Jeremy Hunt, the British finance minister, stated on Wednesday that the government planned to lower inflation because it was destabilizing the economy above 10%.

Consumer price inflation (CPI), reported in official data earlier on Wednesday, decreased by less than anticipated to a rate of 10.1% annually.

GBP/USD key events today

Investors will be watching the US, which will issue several important news. These include the reports on existing home sales, the Philadelphia Fed manufacturing index, and initial unemployment claims.

GBP/USD technical outlook: Firm resistance at the 30-SMA

GBP/USD technical outlook
GBP/USD technical outlook chart

GBP/USD is stuck below the 30-SMA resistance. Bulls keep pushing above, but the price is constantly rejected and pushed lower. This is a battle between bears and bulls. At the moment, bears are in control as the price is below the SMA. 

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If bears can keep control, we will see the price respect the SMA resistance and push lower. Bears will look to retest support levels at 1.2400 and 1.2350. However, a break above the SMA would mean a shift in sentiment to bullish, and the price would climb to the 1.2500 resistance.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.