- There is a higher chance the Fed will cut rates by the end of the year.
- There is a divergence in policy outlooks between the Fed and the BoE.
- The dollar weakened after a mixed employment report.
The GBP/USD weekly forecast leans bullish as market participants expect the Fed to cut rates much earlier than the Bank of England.
Ups and downs of GBP/USD
The pair had a bullish week where the dollar weakened after Powell’s testimony to Congress. On Wednesday and Thursday, Powell restated the Fed’s commitment to lower inflation to its 2% target. However, he also said there was a high chance the Fed would cut rates by the end of the year.
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Notably, there is a divergence in policy outlooks between the Fed and the BoE. While Fed rate cuts are coming closer, the BoE might be the last major central bank to cut rates. As a result, the pound made new highs in the week.
Additionally, the dollar weakened after a mixed employment report showing a big employment increase and a higher-than-expected unemployment rate.
Next week’s key events for GBP/USD
High-impact data from the UK next week will include data on employment, manufacturing and economic growth. Meanwhile, investors will focus on inflation and sales data from the US. The UK economy has performed better than expected in 2024. Therefore, if the economy shows strength next week, it could propel the pound to new heights.
Meanwhile, the US dollar weakened last week amid rising rate cut expectations. The inflation report will also have a big impact on the outlook for rate cuts. Consequently, a figure above or below estimates might cause a lot of volatility.
GBP/USD weekly technical forecast: Bulls break above 1.2800 resistance
On the technical side, GBP/USD is bullish and has made a new high above the 1.2800 key resistance level. After taking control from bears and reversing the trend, bulls pushed the price to the 1.2800 key level, where it paused. Moreover, there were signs of weaker bullish momentum. Consequently, bears got a chance to challenge the bullish trend. The price broke below the 22-SMA, and the RSI dipped below 50.
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However, bears could not go below the 1.2500 key support level. At this point, the bulls regained momentum, taking back control and breaking above 1.2800. There is a high chance this bullish move will continue next week. Therefore, GBP/USD might retest the 1.3002 key psychological level.
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- Source: https://www.forexcrunch.com/blog/2024/03/09/gbp-usd-weekly-forecast-fed-set-to-slash-rates-ahead-of-boe/
