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GBP/USD Price Forecast: Trading at $1.2595 Amid Fed’s Hawkish Stance and Upcoming CPI Data

Despite the Bank of England’s dovish stance on interest rates, the GBP/USD pair has been showing a slight upward trend, hovering around the $1.2601 level and hitting an intraday high of $1.2606.

GBP/USD Price Chart - Source: Tradingview

The Federal Reserve’s hawkish stance hasn’t provided much support to the US dollar, allowing the Pound Sterling to maintain its strength.

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The recent US Producer Price Index (PPI) data, which rose 2.2% year-over-year in April, slightly higher than March’s 1.8% increase, did not significantly boost the dollar, indicating that market participants remain cautious about buying into the greenback despite rising inflation.

Federal Reserve’s Hawkish Stance and Economic Indicators Impact GBP/USD

The Federal Reserve continues its hawkish stance, emphasizing careful monitoring of economic indicators before making any decisions on interest rates. Despite the PPI indicating higher inflation, Fed officials have suggested that this alone does not justify immediate rate action.

Cleveland Fed President Loretta Mester’s proposal to begin tapering asset purchases this year highlights the Fed’s cautious approach.

Investors are now focused on the upcoming US Consumer Price Index (CPI) data, which could influence expectations for Fed rate cuts this year and impact the USD’s performance against the Pound Sterling.

UK Employment Reports and Speculation of BoE Rate Cuts

The UK’s employment reports indicate cooling in the labor market, raising expectations of potential rate cuts by the Bank of England (BoE) in the coming months.

The UK’s Unemployment Rate rose to 4.3% in the three months to March, and private-sector wage growth slowed. The Employment Change showed a decline of 177,000 jobs in the same period.

These signs of economic slowdown may prompt the BoE to consider rate cuts before the Federal Reserve, potentially putting downward pressure on the GBP/USD pair.

Events Ahead

The upcoming economic data releases are crucial for GBP/USD price movements. The US Core CPI is expected to increase by 0.3% month-over-month, down from 0.4%. Core Retail Sales are forecasted to rise by 0.2%, a significant drop from the prior 1.1%. The overall CPI is projected to remain steady at 0.4% month-over-month, while the annual CPI is expected to ease slightly to 3.4% from 3.5%.

The Empire State Manufacturing Index is anticipated to improve to -9.9 from -14.3, and Retail Sales are expected to grow by 0.4%, down from the previous 0.7%. These indicators will provide further insights into the US economic outlook and could significantly impact the GBP/USD pair.

GBP/USD Price Forecast: Technical Outlook

GBP/USD is currently trading at $1.25949, showing a modest increase of 0.02% for the day. The 4-hour chart reveals key levels that could determine the next directional move. The pivot point is at $1.25668, serving as a critical reference for traders.

Immediate resistance is at $1.26348, followed by $1.26981 and $1.27643. Breaking above these resistance levels would signal a stronger bullish trend, potentially leading to further gains.

Immediate support is found at $1.25099, with subsequent support levels at $1.24470 and $1.23890. A fall below these support levels could indicate a bearish reversal.

GBP/USD Price Chart

Technical indicators show the Relative Strength Index (RSI) at 66, suggesting the market is approaching overbought territory but still has room for upward movement. The 50-day Exponential Moving Average (EMA) is at $1.25403, aligning closely with the current price and reinforcing the medium-term bullish trend.

The overall technical outlook for GBP/USD remains bullish above the pivot point of $1.25668. A break above this level could encourage more buying interest, targeting the immediate resistance levels.

Conversely, failure to maintain above the pivot point may test the immediate support levels, leading to potential downside risks. In conclusion, the recommended entry price for a buy is above $1.25678, with a take profit target at $1.26346 and a stop loss at $1.25344.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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