GBP/USD Outlook: Pound Consolidates Ahead of Fed, BOE

• Investors expect the Fed to raise interest rates by another 25 basis points.

• Traders are debating possible Fed rate cuts starting in July.

• Economists expect the BoE to hike rates by another quarter point to 4.5%.

Today’s GBP/USD outlook is slightly bearish. The dollar was stronger as it entered the final trading week of the month.

Investors expect the Fed to lift interest rates by 25bps at their meeting next week. However, the focus will be on the direction of future rate hikes.

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While some economic figures show strength, most show that the US economy is declining. As a result, traders are debating possible rate cuts starting in July and continuing through the end of the year.

On Friday, Deputy Governor of the Bank of England Dave Ramsden stated that the Bank of England must concentrate on tightening monetary policy sufficiently to manage inflation. It must also ensure that no “inflationary mentality” emerges.

Economists expect the BoE to hike rates by another quarter point to 4.5% on May 11. This would be the institution’s 12th straight rate increase since it began raising interest rates in December 2021.

However, two members of the central bank’s Monetary Policy Committee have recently voted against further rate hikes. They claim that the economy still needs to feel the previous increases fully.

Ramsden expressed his fear that seven consecutive months of double-digit inflation run the danger of instilling longer-term expectations of high inflation. This could result in more persistent inflation.

GBP/USD key events today

The pair will likely experience a quiet trading session as there won’t be significant economic releases from the US or the UK.

GBP/USD technical outlook: Bulls struggling within consolidation

GBP/USD is caught in a tight consolidation in the 4-hour chart. The price is trading with resistance at 1.2450 and support at 1.2401. It has no clear direction as it chops through the 30-SMA. The RSI is also chopping through 50, a sign that sentiment keeps shifting. 

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From here, the price will either break above the resistance or below the support. A break below the support would see the price fall to the 1.2350 support. However, on a larger scale, the price still makes higher highs and higher lows. This increases the likelihood that the price will break above the range resistance to retest the 1.2500 resistance.

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