GBP/USD Eyes $1.3660 as Sterling Rises on BoE Hold Bets, Weak US Jobs Data
On Thursday, the British pound continued its upward trajectory, trading above $1.3570 as investors expressed confidence that the central...
Quick overview
- The British pound is trading above $1.3570, buoyed by investor confidence in the Bank of England's decision to maintain interest rates amid persistent inflation and a strong labor market.
- UK Governor Andrew Bailey's emphasis on a 'gradual and data-dependent' strategy has led traders to adjust their forecasts for immediate rate cuts.
- In contrast, the US dollar faces challenges from disappointing employment figures and renewed trade tensions, complicating the Federal Reserve's policy decisions.
- The GBP/USD pair is approaching a critical resistance level at $1.3590, with potential targets for further gains if it breaks above this level.
On Thursday, the British pound continued its upward trajectory, trading above $1.3570 as investors expressed confidence that the central bank of the UK, the Bank of England (BoE), will avoid cutting its IR (interest rates) in the near term. This bullish sentiment is largely driven by persistent inflation and a robust UK labor market, which support the argument for a more cautious approach from the UK’s BoE.
Lately, UK Governor Andrew Baihas has stressed a “gradual and data-dependent” strategy, backing market expectations and leading traders to mount back their forecasts for immediate rate cuts.
Despite a relatively quiet week for UK economic data, the absence of negative surprises has allowed the GBP/USD pair to thrive on a wave of optimism. As the BoE exhibits a more neutral stance rather than a dovish one, the British pound is finding ample room to appreciate, even amidst swirling global uncertainties.
US Dollar Faces Headwinds from Trade Tensions and Economic Data
Alternatively, the US dollar is grappling with significant pressure. Recent US ADP employment figures revealed a disappointing addition of only 37,000 jobs in May, far below the forecast 115,000.
In addition to this, the latest ISM PMI data painted a bleak picture of the US economy, raising concerns that it may be slowing more rapidly than expected.
Compounding these challenges, President Trump’s decision to double tariffs on steel and aluminum imports to 50% has reignited trade tensions, introducing further inflationary risks that complicate the Federal Reserve’s policy decisions.
While Trump has criticized Fed Chair Jerome Powell for not cutting rates, the market is now keenly awaiting the upcoming Non-Farm Payrolls (NFP**)** report, which could significantly influence future expectations.
GBP/USD Technical Outlook: Targeting Key Resistance Levels
As the pound rallies, it approaches a critical test at the $1.3590 resistance level, which has constrained price movement since mid-May. Currently trading at $1.3574, the pair is supported by a rising trendline and the 50-period EMA at $1.3528.
The MACD indicator has turned bullish, and the formation of higher lows suggests a positive momentum. A confirmed close above $1.3590 on a 2-hour chart could pave the way for a move toward $1.3627, with an additional target at $1.3660.
In contrast, should the price pull back, levels at $1.3544 and $1.3528 are likely to provide support for potential re-entry areas.
For new traders seeking a breakout confirmation or a retest and bounce above $1.3544, this may provide clearer entry opportunities. As always, it’s crucial to let price action dictate the narrative, ensuring informed trading decisions in this dynamic market landscape.
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