- Data revealed that US consumer prices remained unchanged in May.
- Experts believe the downtrend in inflation could continue as major US retailers slash goods prices.
- After the inflation report, the likelihood of a Fed rate cut in September rose from 54% to 70%.
The GBP/USD outlook is mildly bearish as the price pulls back after rising to new highs in the previous session. The retreat comes as the dollar recovers following hawkish sentiment at the Federal Reserve’s policy meeting.
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The pound rallied on Wednesday after data revealed that US consumer prices remained unchanged in May due to cheaper gasoline. This was a significant drop from the previous month when there had been a 0.3% increase. Meanwhile, economists had expected prices to increase by 0.1% during the month.
Furthermore, core inflation significantly declined, leading to a surge in bets for two Fed rate cuts this year. Experts believe this downtrend could continue since major US retailers are slashing goods prices. This is also a sign that demand and consumer spending are weakening. Therefore, there is more pressure on the Fed to lower borrowing costs. After the inflation report, the likelihood of a rate cut in September rose from 54% to 70%.
However, this outlook shifted slightly after the FOMC policy meeting, where policymakers were more hawkish than expected. Fed officials believe the economy remains robust. Therefore, they project the first rate cut in December.
Meanwhile, data from the UK on Wednesday showed that UK economic growth stalled at the start of Q2 due to heavy rains. Markets are pricing in a 70% chance that the Bank of England will implement the first rate cut in September.
GBP/USD key events today
- US core PPI m/m
- US PPI m/m
- US unemployment claims
GBP/USD technical outlook: Bulls make a new high above 1.2800
On the technical side, the GBP/USD price temporarily breached the 1.2800 resistance level before falling back below. This indicates a sudden shift in sentiment that allowed bears to return to the market. However, the bullish bias remains strong, with the price above the 30-SMA and the RSI above 50.
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For some time, the price has traded in a range with support at 1.2700 and resistance at 1.2800. However, since the consolidation came after a bullish trend, there is a high chance bulls will take the lead again. Therefore, the price might retest the 1.2800 resistance. A break above would open the path to the 1.2900 psychological level.
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- Source: https://www.forexcrunch.com/blog/2024/06/13/gbp-usd-outlook-pound-retreats-after-cpi-led-gains/
