Daily Price Outlook
During the European trading session, the GBP/USD currency pair has been gaining momentum, holding steady around the 1.2472 mark and reaching an intraday high of 1.2492.
The recent upward movement can largely be attributed to the ongoing recovery in the British Pound (GBP), as traders remain cautious about the US Dollar’s (USD) potential strength. Despite this, the upside for GBP/USD might be limited due to the hawkish stance from the Federal Reserve (Fed).
Federal Reserve has already reduced interest rates by one percentage point since September 2024 and is expected to slow down further rate cuts this year.
This continues to provide support for the USD. Investors will be keeping an eye on the upcoming speech from Fed Governor Lisa Cook later today, as her comments may offer more insights into the central bank's rate decisions moving forward.
Meanwhile, the Pound faces additional pressure from growing dovish expectations surrounding the Bank of England (BoE). The markets are now pricing in a 60 basis point interest rate cut by the BoE this year, up from 53 bps just a week ago.
These factors are weighing on the GBP, potentially limiting the scope for further recovery. As the day progresses, market participants will be closely watching both central banks for any updates that could shift the outlook for the GBP/USD pair.
BoE's Dovish Outlook and Its Impact on the Pound Sterling (GBP)
On the GBP front, the rising expectations for a more dovish stance from the Bank of England (BoE) could put pressure on the British Pound (GBP).
The market is now expecting nearly 60 basis points (bps) of interest rate cuts from the BoE this year, up from 53 bps in late December. This suggests that investors are becoming more cautious about the BoE's ability to support the Pound in the coming months.
Matthew Ryan, head of market strategy at Ebury, mentioned that BoE policymakers seem to be divided on the future path for UK interest rates.
This division reflects the complex situation in the UK economy. While consumer demand remains fragile, other factors, like the government's Autumn Budget and potential tariff proposals from Trump, are adding inflationary pressure, making it harder to find a clear direction.
These mixed signals from the BoE make the outlook for the Pound uncertain. While weaker consumer demand suggests a need for lower interest rates, inflationary concerns might prevent the central bank from acting too quickly.
As a result, the GBP could face challenges if investors continue to price in a slower pace of rate cuts or even potential rate cuts later this year.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.24409, up 0.19% for the day as the pair shows signs of consolidation near its pivot point at $1.24787.
The 4-hour chart reflects cautious optimism, but the broader trend remains under pressure as the price trades below the 50-day EMA at $1.25095, signaling bearish momentum in the near term.
Immediate support is located at $1.24089, which is critical for maintaining stability. A break below this level could drive the pair lower toward $1.23494 and $1.23014, signaling deeper retracements.
Conversely, resistance stands at $1.25601, with additional barriers at $1.26142 and $1.26639. A breakout above $1.25601 could trigger a bullish move, but such a scenario remains contingent on a sustained push above the pivot point.
The Relative Strength Index (RSI) at 44 indicates weak momentum, leaning slightly toward bearish sentiment. This aligns with the broader technical outlook, suggesting that selling opportunities below the pivot may yield better risk-reward dynamics.
For intraday traders, selling below $1.24785, with a target of $1.24097, appears prudent, while a stop-loss at $1.25126 limits potential losses in case of a reversal.
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