Fundamental Overview
The US dollar has faced renewed pressure after the release of the US Consumer Price Index (CPI) report. The data was largely in line with forecasts, which wasn’t strong enough to deter the market from expecting a rate cut in September. In fact, the market’s expectation of a cut has increased, with a 60 basis point easing predicted by the end of the year, up from 57 basis points before the CPI release.
Market Expectations
A rate cut in September now seems unavoidable, and only a strong Non-Farm Payroll (NFP) report in September could potentially change this outlook. However, even a strong NFP report would likely diminish expectations for further rate cuts after September. The next major event is Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium, which traders will be watching closely for any changes in stance.
GBP Overview
On the other hand, the Bank of England (BoE) delivered a hawkish cut last week, with the first voting round failing to produce a majority. This was the first time the BoE had to conduct two voting rounds to reach a majority. The central bank also revised its inflation forecasts upwards, acknowledging that inflation should be its biggest concern given the UK’s high inflation rate. Core inflation has never fallen below 3% since 2021, and coupled with high wage growth and a central bank that is cutting rates, the outlook for the BoE is tricky.
GBPUSD Technical Analysis
Daily Timeframe
The GBPUSD daily chart shows that the currency pair has rallied up to the key swing level at 1.3590. Sellers are expected to step in at this level, with a defined risk above it to position for a drop back into the 1.3368 level. Buyers, on the other hand, will want to see the price break higher to increase bullish bets into the 1.38 handle next.
4 Hour Timeframe
On the 4-hour chart, a minor upward trendline defines the bullish momentum. If there’s a pullback, buyers will likely lean on the trendline with a defined risk below it to keep pushing into new highs. Sellers will look for a break lower to increase bearish bets into the 1.3368 level next.
1 Hour Timeframe
The 1-hour chart shows a tight range, with a break on either side potentially triggering a more sustained move. The red lines define the average daily range for today.
Upcoming Catalysts
Today, the US Producer Price Index (PPI) and US Jobless Claims figures will be released. Tomorrow, the week will conclude with the US Retail Sales and the University of Michigan Consumer Sentiment report.
Conclusion
In conclusion, the US dollar is facing pressure due to expectations of a rate cut in September, while the GBP is experiencing a tricky outlook due to high inflation and wage growth. The GBPUSD technical analysis shows a rally up to the key swing level at 1.3590, with sellers expected to step in. The upcoming catalysts, including the US PPI and Jobless Claims figures, will be closely watched by traders for any changes in market sentiment.
