GBP/USD Price Forecast: GBP/USD Falls to $1.2746 Amid Soft UK Inflation Outlook

During the European trading session, the GBP/USD pair has continued its downward trend, trading around the 1.2760 level and hitting

Written by: Arslan Ali Butt • Wednesday, May 29, 2024 • 2 min read

• Last updated: Saturday, June 1, 2024

GBP/USD Price Forecast: GBP/USD Falls to $1.2746 Amid Soft UK Inflation Outlook

During the European trading session, the GBP/USD pair has continued its downward trend, trading around the 1.2760 level and hitting an intraday low of 1.2746.

This decline is attributed to a combination of factors, including a soft UK inflation outlook and uncertainty surrounding central bank policies. Investors are closely monitoring economic data releases and central bank statements for further guidance on the currency pair’s trajectory.

UK Inflation and Bank of England Policy

Recent data from the British Retail Consortium (BRC) revealed a slowdown in UK shop price inflation, with notable easing in both food and non-food items in May. This reduction suggests weaker consumer spending and economic activity, dampening investor confidence in the Pound.

Additionally, the possibility of the Bank of England (BoE) unwinding its higher interest rate stance adds further pressure. With a softening inflation outlook, there are growing expectations that the BoE might consider rate cuts to stimulate economic growth, impacting the GBP/USD price.

US Dollar Strength Amid Core PCE Price Index Uncertainty

The US Dollar has strengthened ahead of the release of the US Core Personal Consumption Expenditure (PCE) Price Index, affecting the GBP/USD pair. Investors are anticipating the PCE data for insights into the Federal Reserve’s interest rate outlook.

Expectations of steady inflation growth in the US have bolstered forecasts for the Federal Reserve maintaining higher interest rates. This contrasts with the speculation of potential rate cuts by the BoE, contributing to the relative strength of the US Dollar against the Pound Sterling.

GBP/USD Technical Outlook

The GBP/USD pair is currently trading at $1.27490, reflecting a decline of 0.12% in the latest session. The pivot point, marked at $1.2793, is crucial for determining market direction. Immediate resistance levels are at $1.2765, $1.2793, and $1.2822, while support levels are at $1.2711, $1.2676, and $1.2648.

The Relative Strength Index (RSI) is at 52, indicating neutral market sentiment with a slight bullish bias. The 50-day Exponential Moving Average (EMA) stands at $1.2724, suggesting that the current price is slightly above this short-term average, supporting a bullish outlook.

From a technical perspective, sustaining above the pivot point of $1.2793 could lead to gains towards the immediate resistance levels. Conversely, if the GBP/USD pair falls below the immediate support level of $1.2711, further declines towards $1.2676 and $1.2648 are likely.

In conclusion, the outlook for GBP/USD remains cautiously bullish above the pivot point of $1.2793, with a potential buy position at $1.27332, a take profit target at $1.27927, and a stop loss at $1.27036.

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ABOUT THE AUTHOR See More

Arslan Ali Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Ali 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.