- The GBP/USD outlook shows the dollar near a five-week low amid bets on a Fed rate cut.
- The preliminary GDP reading revealed that the US economy expanded by 3.3%.
- The pound remains vulnerable amid fiscal worries in the UK.
The GBP/USD outlook shows the dollar near a 5-week low as traders price a 90% chance of a Fed rate cut this month. This has allowed the pound to remain steady despite fiscal concerns in the UK. However, caution is warranted ahead of the crucial nonfarm payrolls report, which could alter this outlook.
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Comments from Fed officials last week revealed a more dovish tone, with some showing confidence that the central bank will cut rates this month. As a result, bets on rate cuts remained elevated despite some upbeat economic data.
Notably, the preliminary GDP reading revealed that the US economy expanded by 3.3%, larger than the forecast of 3.1%. Meanwhile, unemployment claims fell more than expected. Nevertheless, traders are still pricing a 90% chance of a cut later in the month.
A downbeat employment report might revive expectations for a bigger 50-bps rate cut. On the other hand, an upbeat report would lower expectations for a rate cut.
Meanwhile, the pound remains vulnerable amid fiscal worries in the UK. Last week, UK bank shares declined as yields rose amid concerns about the country’s financial situation. These concerns will likely continue to pressure the UK’s currency.
GBP/USD key events today
Market participants do not expect any high-impact economic releases from the US or the UK. Therefore, the pair might start the week slowly.
GBP/USD technical outlook: Bulls struggle to sustain above the 30-SMA
On the technical side, the GBP/USD price trades above the 30-SMA, with the RSI above 50, suggesting a bullish bias. However, the price remains trapped between the 1.3401 support level and the 1.3575 resistance level. Although bulls have shown strength, they are struggling to break away from the 30-day SMA.
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Bulls started strengthening when the price met the support zone comprising the 0.382 Fib and the 1.3401 level. However, the price has continued to chop through the SMA, indicating a corrective move. If bulls do not gain enough momentum to cause an impulsive move, bears might take back control at the nearest resistance level.
Currently, the price is approaching the 1.3575 resistance. A break above would strengthen the bullish bias. On the other hand, if the level holds firm, bears might take over.
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Saqib Iqbal
