GBP/USD Price Forecast: Dips to $1.2422 Amid US Dollar Strength & Mixed PMI Data

Despite a more optimistic economic forecast for the UK, the GBP/USD currency pair has shown a bearish trend, consistently trading around the 1.2616 mark and dipping to an intraday low of 1.2422.

This decline is largely due to the strengthening US dollar, which has continued to rise despite a weakening in US economic momentum as indicated by disappointing PMI releases. These indicators suggest a slowdown in economic growth at the onset of Q2, directly impacting the GBP/USD price.

Bank of England’s Rate Strategy Influences Pound Dynamics

The potential for the Bank of England to maintain or even raise interest rates has provided some support for the British Pound.

This comes in response to robust PMI data, particularly within the UK services sector, which recorded a stronger-than-expected reading, reflecting significant new business volumes and possibly heightened consumer spending.

Such economic activity could lead to higher inflation, prompting the Bank to consider a more hawkish monetary policy, which in turn supports a bullish perspective for the GBP/USD pair.

Mixed PMI Data Adds Complexity to GBP/USD Movements

Recent PMI figures reveal a mixed economic picture in the UK. The Services PMI exceeded expectations, hitting 54.9 and indicating strong sector growth, contrary to predictions of a decline.

In contrast, the Manufacturing PMI fell below the growth threshold to 48.7, suggesting a contraction in the manufacturing sector.

This disparity introduces volatility to the GBP/USD market, as traders weigh the implications of divergent sectoral performances on the overall economic landscape and currency strength.

Impact of Federal Reserve’s Stance on USD Strength

The strengthening of the US dollar has been underpinned by expectations that the Federal Reserve will maintain elevated interest rates longer due to persistent inflation pressures.

This anticipation strengthens the USD, placing downward pressure on the GBP/USD exchange rate as the dollar’s appeal as a safe-haven currency increases amidst global economic uncertainties.

Technical Analysis and Strategic Trading Recommendations

Currently, the GBP/USD pair has shown a slight uptick, registering a 0.03% increase to $1.24527. The currency pair is hovering around its pivotal support at $1.2386, which could be crucial for determining future movements.

Immediate resistance is observed at $1.2526, with further potential ceilings at $1.2580 and $1.2638, which could restrict upward progress. Support levels are found at $1.2407, extending to $1.2349 and $1.2304, which may offer buying opportunities during pullbacks.

The technical indicators suggest a cautiously bullish sentiment with the Relative Strength Index (RSI) at 58, indicating that the market is approaching overbought territory, which might lead to a corrective downturn.

The 50-day Exponential Moving Average (EMA) is currently at $1.2431, slightly below today’s price, signalling potential resistance. The presence of a doji candlestick pattern near the downward trendline around $1.2450 also hints at possible selling pressure intensifying.