GBP/USD Price Forecast: Will the Pair Hold Above 1.3000 Amid Mixed Economic Signals?

The GBP/USD pair has managed to stay resilient above the critical 1.3000 level, recently testing highs near 1.3050.

This strength can be attributed to growing speculation that the U.S. Federal Reserve (Fed) may initiate interest rate cuts as early as September.

#GBPUSD: 1.2978 breaks and cable trades at one of its highest levels for the year. Next logical target is 1.3150; we have the UK PMI prints tomorrow. Not overbought yet. The upper end of the channel is around 1.31 and resistance at 1.3150; support at 1.2978 pic.twitter.com/sx9QVbM7wE

— rajesh kazhipurath (@RajeshKaz) August 21, 2024

However, the pair’s upward momentum is being moderated by mixed economic data from the United Kingdom, particularly concerns about wage growth and the potential impact of monetary policy shifts.

USD Softens as Fed Rate Cut Speculation Grows

In the U.S., the broader U.S. dollar has found some temporary support around the 101.30 level following a recent decline.

The dollar’s weakness is primarily due to market anticipation that the Fed could cut interest rates soon, possibly as early as September.

Investors are closely watching the Federal Open Market Committee (FOMC) minutes from the July meeting, which are set to be released at 18:00 GMT, for further clues on the Fed’s policy direction.

#Gold futures added to their previous recent highs on Monday, driven by a weakening dollar and growing speculation about potential Federal Reserve rate cuts.

— Ric Bender (@ricbender) August 20, 2024

While the Fed kept its key interest rates unchanged at 5.25%-5.50% during its July meeting, it highlighted ongoing economic uncertainties that could influence future decisions.

The CME Group’s FedWatch Tool currently indicates a 70% probability of a rate cut, with a Reuters poll suggesting that the Fed might reduce rates by 25 basis points at each of the remaining three meetings in 2024.

However, Fed Governor Michelle Bowman has expressed caution, noting that inflation remains above the 2% target, which could delay any rate cuts.

UK Economic Data Creates Uncertainty for GBP/USD

On the UK front, recent economic data presents a mixed picture. UK wage growth has slowed to 4.5% in the three months ending in July, down from 5% previously.

This decline in wage growth has reduced inflationary pressures, fueling speculation that the Bank of England (BoE) might consider cutting rates in September.

📊 UK Q2 GDP Growth Meets Expectations, but June Shows Stagnation. 🇬🇧 The GBP/USD has partially rebounded after July’s sell-off, with key support around 1.2685. 📈

With mixed inflation data and a potential Fed rate cut, how will GBP/USD perform? Get the latest analysis and stay… pic.twitter.com/UgavsdvYJc

— WikiTrade Global (@WikiTradeGlobal) August 19, 2024

However, the UK’s Consumer Price Index (CPI) for July showed core inflation at 3.3%, and inflation in the service sector remains elevated at 5.2%. These mixed signals make it difficult to predict the BoE’s next move.

The upcoming S&P Global Purchasing Managers’ Index (PMI) data for August, scheduled for release on Thursday, could provide further insights. The Manufacturing PMI is expected to remain steady at 52.1, while the Services PMI is forecasted to improve to 52.8.

GBP/USD Price Forecast

As of now, GBP/USD is trading at $1.30261, showing a slight decline of 0.03% as the pair hovers around key support levels. The pivot point is currently set at $1.3040, which is crucial in determining the next direction for the pair.

Immediate resistance is identified at $1.3097, with further resistance levels at $1.3133 and $1.3174. On the downside, immediate support lies at $1.2978, followed by $1.2933 and $1.2887.

The Relative Strength Index (RSI) is at 75, indicating that the GBP/USD pair is in overbought territory, which could trigger a pullback.

Additionally, the 50-day Exponential Moving Average (EMA) is positioned at $1.2872, supporting a bearish outlook if the pair fails to break above its pivot point.

Conclusion: Potential for Bearish Correction

Given the overbought RSI and the strong resistance ahead, the GBP/USD pair could face selling pressure if it fails to hold above $1.3040.

Traders might consider selling below $1.30398, targeting a profit of around $1.29802, with a stop loss at $1.30911.