GBP/USD Price Forecast: Eyes on UK CPI, FOMC, and Fed Rate Decision for Trade Direction
On March 20, the GBP/USD pair exhibited minimal movement, inching up by 0.02% to close at 1.2722. Market participants are poised
On March 20, the GBP/USD pair exhibited minimal movement, inching up by 0.02% to close at 1.2722. Market participants are poised for the release of the UK’s Consumer Price Index (CPI) for February and the Federal Reserve’s decision on interest rates.
The expectation is for the Fed to maintain its policy rate unchanged for the fifth consecutive session at its March gathering. Currently, the GBP/USD is slightly down by 0.01%, trading at around 1.2719.
Anticipating the Federal Reserve’s Stance
The consensus anticipates the Fed to hold its benchmark interest rate steady between 5.25% and 5.5%, given persistently high inflation. Fed Chair Jerome Powell has previously indicated that premature rate cuts could reignite inflationary pressures, adversely affecting consumers.
The Fed’s upcoming statements are likely to reiterate the necessity for clear evidence of inflation trending towards its 2% goal prior to any rate reductions, potentially strengthening the USD in the short term and limiting GBP/USD gains.
UK CPI Data to Influence BoE Policy Outlook
The imminent UK CPI inflation data could shed light on the Bank of England’s (BoE) monetary policy direction—whether it suggests an earlier rate cut or maintains the current higher rates.
Expected to show a month-on-month increase of 3.6% in February, down from January’s 4.0%, and a year-on-year core CPI increase to 4.6% from January’s 5.1%, robust inflation figures could persuade the BoE to sustain elevated interest rates, bolstering the GBP against the USD.
Key Events to Shape GBP/USD Dynamics
The impending UK CPI report, followed by the Fed’s rate decision and subsequent commentary from Chair Powell, will be critical for the GBP/USD forecast. Attention will then shift to the BoE’s rate decision on Thursday, potentially offering clarity on the pair’s direction. These pivotal events are set to define the short-term trajectory for the GBP/USD pair, amidst ongoing adjustments in global monetary policies.
- UK CPI Yearly: Expected to moderate to 3.5% from 4.0%.
- Core CPI Yearly: Forecasted to decrease to 4.6% from 5.1%.
- Producer Price Index (PPI) Inputs Monthly: Anticipated slight increase to 0.2% from -0.8%.
These developments underscore the interconnectedness of inflationary trends, central bank policies, and their collective impact on the GBP/USD price forecast, with traders eagerly awaiting these announcements for directional cues.
GBP/USD Price Forecast: Technical Outlook
The pair finds its pivot point at 1.2727, a level that traders are watching as a potential indicator for future direction. Resistance and support levels delineate the potential range for the GBP/USD.
Immediate resistance is marked at 1.2760, with further ceilings at 1.2808 and 1.2859, suggesting areas where upward momentum may face hurdles.
Conversely, the currency pair finds support at 1.2672, with additional buffers at 1.2642 and 1.2612, which could stabilize declines.
Technical indicators shed light on the pair’s current state. The Relative Strength Index (RSI) stands at 44, pointing to a sell zone, while the formation of an inverted hammer pattern underlines potential downtrend pressures as long as the pair remains below the 1.2725 mark.
The 50-Day Exponential Moving Average (EMA) at 1.2744 further supports this cautious outlook, offering resistance that could cap gains. In conclusion, the GBP/USD’s present stance is bearish below the 1.2727 pivot, indicating potential for further declines.
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