GBP/USD Outlook: Dollar Rebounds After Powell Firing Denial

• The GBP/USD outlook shows a rebound in the dollar.

• The dollar eased in the previous session as traders worried about a likely firing of Fed Chair Jerome Powell.

• The CPI increased by 3.6% compared to the forecast of 3.4%.

The GBP/USD outlook shows a rebound in the dollar after Trump denied reports he was planning to fire Powell. However, market participants are still digesting the upbeat UK CPI report that has eased bets for a BoE rate cut. Meanwhile, the US released a wholesale inflation report showing no change in June.

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The dollar eased in the previous session as traders worried about a likely firing of Fed Chair Jerome Powell. Such an outcome would put into question the independence of the Fed. At the same time, it would mean a replacement who would be quick to lower borrowing costs. However, Trump later denied these reports, allowing the dollar to recover some of its losses. 

Meanwhile, the pound jumped on Wednesday after the UK released a hotter-than-expected inflation report. Notably, the CPI increased by 3.6% compared to the forecast of 3.4%. The jump could prompt policymakers to reassess their outlook for rate cuts. However, data has also shown that economic growth is poor.

In the US, wholesale inflation remained unchanged in June. Meanwhile, economists had expected a 0.2% increase. Nevertheless, the upbeat consumer inflation report on Tuesday led to a decline in Fed rate cut expectations. 

GBP/USD key events today

• US core retail sales m/m
• US retail sales m/m
• US unemployment claims

GBP/USD technical outlook: Bears paused at 1.3400

On the technical side, the GBP/USD price has paused its decline near the 1.3400 key support level. The price trades well below the 30-SMA, and the RSI is near the oversold region, suggesting a solid bearish bias. 

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Since GBP/USD broke below the 1.3600 key level, it has not paused or made a significant pullback to the 30-SMA. After such a steep rally, bears are showing some exhaustion near the 1.3400 key level. Meanwhile, bulls have gained momentum. 

If this is only a pause in the downtrend, the price will soon break below 1.3400 to make new lows. However, if the support is firm, bulls might emerge to push the price above the 30-SMA. Such an outcome would allow GBP/USD to retest the 1.3600 level. It would also signal a shift in sentiment. 

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