- The greenback is heading for a second quarter of gains due to a drop in Fed rate cut expectations.
- Market participants will pay close attention to the PCE price index report.
- The US GDP rose from 1.3% to 1.4%, as expected.
The GBP/USD outlook remains bearish, even with a slight rebound, as investors eagerly await the US PCE price index report. At the same time, the dollar was steady after rising due to data showing continued strength in the US economy.
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The greenback is heading for a second quarter of gains due to a drop in Fed rate cut expectations. Markets have had to readjust expectations for rate cuts since the year began. Currently, investors expect two cuts for the year. However, the Fed has a less dovish outlook, forecasting just one rate cut.
Consequently, market participants will pay close attention to the PCE price index report later in the day. Economists expect inflation to soften to an annual rate of 2.6% in May. If the figures match these estimates, Fed rate cut expectations will increase. On the other hand, a bigger-than-expected number would reduce rate cut expectations.
Furthermore, the dollar got a boost from the previous session’s data. The GDP rose from 1.3% to 1.4%, as expected. Meanwhile, unemployment claims fell from 239,000 to 233,000, showing continued strength in the US labor market.
On Thursday, a former MPC member said the Bank of England could cut rates in August. However, it would depend on whether inflation and wage data align with MPC forecasts. Last week, the central bank held rates despite inflation reaching the 2% target. Policymakers are waiting for weaker wage data before starting the rate-cutting cycle.
GBP/USD key events today
- US core PCE price index m/m
GBP/USD technical outlook: Downtrend approaches 1.2600 support
On the technical side, the GBP/USD price trades below the 30-SMA with the RSI below 50, showing a bearish trend. Moreover, the price is making lower highs and lows, indicating a developed downtrend.
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Currently, the price trades with the nearest support at 1.2600 and the nearest resistance at 1.2700. Moreover, the decline has paused, and bulls are challenging the 30-SMA resistance. A break above the SMA would allow the price to retest the 1.2700 resistance. However, if the SMA holds firm, the price will continue the downtrend with the next target at 1.2600.
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Read More: GBP/USD Outlook: No Respite as US PCE Looms