CFD Trading Rate Great Britain Pound vs US Dollar (GBPUSD)

• Pound’s failure to break resistance at 1.2500 leaves bears in control.
• Strong US retail sales figures have pushed the pair back to the bottom of the monthly channel, at 1.2440.
• Below 2.1430, the next support levels are 1.2370 and 1.2220.

Sterling’s recovery attempts have failed to find a significant acceptance above the 1.2500 level earlier on Monday. The pair has succumbed to the broad-based US Dollar strength after the release of upbeat US retail sales figures.

US Consumer spending has beaten expectations in MArch adding to the evidence of a strong US economic outlook. Beyond that, growing concerts about the consequences of an escalation in the Middle East conflict are additional support for the safe-haven USD.

GBP/USD Price Analysis: Technical outlook

Bears have pushed the pair back to the bottom of the monthly descending channel, at 1.2440, which is being tested at the moment. Last Friday’s low is right below there, at 1.2430. A clear break of that support area clears the path towards 1.2370. Further down there is no support until 1.2220.

On the upside 1.2505 level should be cleared to advance towards 1.2565, where an unmitigated order block may provide a fresh boost for bears.
 

GBP/USD 4-Hour Chart

• GBP/USD rebounds from lows since November amid expectations of the Fed delaying rate cuts.
• The escalated Middle-East tension could bolster the demand for the US Dollar.
• BoE could reduce policy rates to around 4.75% by 2024, down from the current rate of 5.25%.

GBP/USD gains ground amid a stable US Dollar (USD), trading around 1.2460 during Asian hours on Monday. The US Dollar (USD) maintains its position below its peak since November 2023, potentially restricting the upward momentum of the GBP/USD pair.

US Dollar Index (DXY) hovers around 106.00, with the 2-year and 10-year yields on US Treasury bonds standing at 4.91% and 4.55%, respectively, by the press time. The elevated US yields may offer support to bolster the US Dollar (USD).

Meanwhile, the Federal Reserve (Fed) seems to reevaluate its monetary easing plans due to ongoing US inflation and robust macroeconomic indicators. According to the CME FedWatch Tool, there has been a notable increase in the likelihood of interest rates remaining unchanged at the June meeting, rising to 63.5% from 46.8% the previous week.

Investors will likely observe Federal Reserve Bank of Kansas President Lorie Logan while participating in a panel discussion at the BoJ-IMF conference on Monday. Furthermore, US Retail Sales figures will be eyed later in the North American session.

On the other side, on Friday, the Pound Sterling (GBP) dipped against the US Dollar to its lowest level since November, reaching 1.2426. Heightened tensions in the Middle East likely prompted traders to seek refuge in the US Dollar.

However, market forecasts for interest rate cuts by the Bank of England (BoE) have been adjusted, with the policy rate now expected to decline to around 4.75% by the end of 2024, down from the current rate of 5.25%. This marks a shift from the previous expectation of a drop to 4.5% by December.

BoE’s policymaker, Megan Greene emphasized that rate cuts in the United Kingdom (UK) should still be considered distant, pointing to a greater risk of persistent inflation in the UK compared to the US. Additionally, traders will likely pay close attention to the speech by Sarah Breeden, BoE's Deputy Governor for Financial Stability, at the Innovate Finance Global Summit 2024 on Monday.

• GBP/USD falls sharply, influenced by a move towards safer assets and a strengthening US Dollar.
• Technical analysis indicates a shift to bearish territory after dropping below the 200-day moving average.
• Recovery targets include reclaiming 1.2500, with resistance at the 200-day DMA.

The British Pound plunged against the US Dollar late in the North American session, down 0.74%, and trades at 1.2445 after hitting a daily high of 1.2559. Risk aversion triggered a flight to safety, a headwind for the Pound Sterling even though UK GDP figures were solid.

GBP/USD Price Analysis: Technical outlook

From a technical perspective, the GBP/USD shifted bearish as it achieved a successive series of lower highs and lows while breaching key support levels. On its way south, the pair cleared the 200-day moving average (DMA) at 1.2584, which opened the door to a tumble below 1.2500.

For a bearish continuation, the GBP/USD needs to clear the 1.2400 mark. A breach of the latter will expose the November 17, 2023, low of 1.2374, followed by the 1.2300 mark.

On the other hand, if buyers lift the GBP/USD past the 1.2500, that could pave the way for further gains. The next resistance would be the 200-day moving average (DMA) at 1.2584, ahead of 1.2600.

As the GBP/USD dropped below key support levels and achieved

GBP/USD Price Action – Daily Chart

• GBP/USD plunges below 1.2500 as faded Fed rate cut hopes strengthen the US Dollar.
• The market sentiment is risk-off as the Fed is expected to delay rate cuts later this year.
• The UK economy is on course to come out of a technical recession.

The GBP/USD pair dips below the psychological support of 1.2500 in Friday’s London session. The Cable weakens due to firm US Dollar. The demand for the US Dollar remains buoyant as stubbornly higher United States inflation data for March forced traders to price out market expectations for rate cuts by the Federal Reserve (Fed), which were anticipated in the June and July meetings.

The market sentiment is downbeat as the Fed is now projected to start reducing interest rates from the September meeting. Also, investors expect that there will be only two rate cuts this year instead of three. There were expectations of six rate cuts at the start of the year.

S&P 500 futures have generated some losses in the European session. The US Dollar Index (DXY) rallies to near 106.00 amid hopes that the Fed will begin reducing interest rates later than other central banks from developed economies. 10-year US Treasury yields fell slightly from four-month high around 4.60%.

Going forward, the US Dollar will be guided by the monthly Retail Sales data of March which will be published on Friday. The monthly Retail Sales data that represents households’ spending is forecasted to have grown at a slower pace of 0.3% from the former reading of 0.6%. This would ease fears of inflation remaining persistently higher.

On the United Kingdom front, the Pound Sterling fails to find bid despite upbeat factory data and expected increase in monthly Gross Domestic Product (GDP) for February. The UK GDP expanded by 0.1% as expected after rising 0.2% in January. Proof of expansion in first two months indicate that the technical recession recorded in the second half of 2023 was shallow.

Next week, the US Consumer Price Index (CPI) and labor market data will significantly influence speculation for the Bank of England (BoE) to begin reducing interest rates, which financial markets are currently expecting from August.

• GBP/USD trades on a softer note around 1.2530 following UK GDP numbers on Friday. 
• UK monthly Gross Domestic Product (GDP) grew 0.1% MoM in February vs. the 0.1% expected. 
• The lower speculation of Fed rate cuts this year lifts the Greenback and weighs on the pair. 

The GBP/USD pair remains on the defensive near 1.2530 during the early European trading hours on Friday. The major pair remains vulnerable despite the stronger-than-expected UK monthly GDP numbers and improved Industrial Production data. 

The latest data released from the Office for National Statistics on Friday showed that the UK monthly Gross Domestic Product (GDP) grew 0.1% MoM in February, compared to an expansion of 0.3% in the previous reading, matching the estimation of a 0.1% expansion. Additionally, UK Industrial Production for February came in better than the market expectation, improving to 1.1% MoM from a 0.3% decline in January. Finally, the UK Goods Trade Balance arrived at GBP-14.212 billion MoM in February from GBP-14.097 billion prior, better than GBP-14.5B expected. The upbeat UK economic data failed to boost the Pound Sterling (GBP) as the markets anticipate the Bank of England (BoE) will cut its interest rate sooner than the US Federal Reserve (Fed).

On the other hand, the recent hotter-than-expected CPI inflation reading and stronger Nonfarm Payrolls (NFP) trigger speculation that the Fed will have to push back the number and timing of interest rate cuts this year. This, in turn, provides some support to the Greenback and creates a headwind for the GBP/USD pair. Investors will take more cues from the preliminary US Michigan Consumer Sentiment Index for April, along with the Fed's Bostic and Daly speeches later on Friday. 

• GBP/USD remains on the defensive around 1.2550 in Friday’s early Asian session. 
• The US Producer Price Index (PPI) increased by 2.1% YoY in March, missing the estimation of 2.2%.
• BoE’s Greene said the rate cuts in the UK should remain "a way off" amid the persistence of inflation pressure. 

The GBP/USD pair remains on the backfoot near 1.2550 during the early Asian session on Friday. The market expects that the Bank of England (BoE) will cut its interest rate sooner than the US Federal Reserve (Fed) weighs on the Pound Sterling (GBP) and the major pair. Later on Friday, investors will monitor the UK monthly Gross Domestic Product (GDP) for February and the preliminary US Michigan Consumer Sentiment Index for April.

The hotter-than-expected CPI inflation reading this week triggers speculation that the Fed will have to push back the number and timing of interest rate cuts this year. Fed officials believe the US central bank had reached the peak of the current rate-tightening cycle and monetary policy was well positioned to react to the economic outlook, including the possibility of keeping rates higher for longer if inflation declines gradually. The hawkish remarks from the Fed lift the Greenback and drag the GBP/USD pair lower. 

On Thursday, the US Producer Price Index (PPI) data for March increased by 2.1% YoY, missing the estimation of 2.2%. The core PPI, which excludes volatile food and energy prices, rose by 2.4% YoY, compared to the market consensus of 2.3%. 

On the other hand, the hawkish comments from BoE policymaker Megan Greene failed to boost the GBP. Greene stated that the interest rate cuts in the UK should remain "a way off" due to the persistence of inflation pressure, which is still more of a threat than in the US. Greene added that markets were wrong to expect that the BoE to cut rates earlier than the Fed this year. The UK GDP numbers for February might offer some hints about the UK economy. If the report shows stronger-than-expected data, this could provide some support to the GBP and cap the downside of the GBP/USD pair. 

 

• The Pound keeps trading lower with the recent reversal from 1.2700 increasing bearish pressure.
• Higher US yields and market expectations of a ‘higher for longer” Fed outlook are expected to support the USD.
• GBP/USD is ready to test an important support area at 1.2500.

The Sterling keeps trading within a bearish channel from early March lows and seems ready to test an important support area at 1.2500. Wednesday’s long negative candle reflects an impulsive bearish move and gives sellers hope to explore fresh year-to-date lows.

US Treasury yieldskeep[ rallying and investors reassess their expectations of Fed cuts this year which is acting as a tailwind for the US Dollar. US PPI data and the slight increase in US Jobless claims have provided a certain relief although USD reversals remain limited for now.

Oscillators are pointing lower and the bearish cross between the 50 and the 100-day SMAss are adding weight to the pair. On Friday the UK Industrial Production data might give further direction to the pair.

The next supports are 1.2500 and 1.2450. On the upside 1.2600 and 1.2710 are likely to cap upside attempts.

GBP/USD Daily Chart

• GBP/USD trades on a softer note around 1.2540 in Thursday’s early Asian session. 
• A resilient US economy and elevated inflation are likely to derail Fed's plans to cut interest rates this year. 
• Any hints about May rate cuts or any dovish remarks from the BoE might exert pressure on the GBP. 

The GBP/USD pair remains under selling pressure near 1.2540 after bouncing off the 2024 low of 1.2520. The sell-off in the major pair is driven by the firmer US Dollar (USD) after the upside surprises in US Consumer Price Index (CPI) data in March. Investors await the US March Producer Price Index (PPI) and weekly Initial Jobless Claims on Thursday ahead of the UK monthly Gross Domestic Product (GDP) numbers later this week. 

On Wednesday, the release of the CPI inflation for March affirmed the conviction that sticky inflation would convince the Federal Reserve (Fed) to delay its rate-cutting plans. Fed Funds Futures market pushed expectations for the first rate cut from June to September, according to the CME FedWatch Tool. 

US inflation, as measured by the CPI, rose 0.4% MoM in March, putting the yearly inflation rate at 3.5%, the Labor Department’s Bureau of Labor Statistics revealed on Wednesday. Meanwhile, the Core CPI, excluding volatile food and energy components, climbed 0.4% MoM while rising 3.8% from a year ago, compared with estimates for 0.3% and 3.7%, respectively.

On the other hand, the Pound Sterling (GBP) will be influenced by the United Kingdom's monthly Gross Domestic Product (GDP) and February Industrial Production, due on Friday. The markets anticipate the UK central bank cutting the rate after its June meeting. Meanwhile, any hints about May rate cuts or any dovish comments from the BoE policymakers might weigh on the GBP and act as a headwind for the GBP/USD pair. 

• GBP/USD breaches key support levels as it loses more than 1%.
• US headline inflation defies the Fed’s intentions to cut rates and climbs.
• Technical outlook suggest that further GBP/USD downside is seen.

The Pound Sterling collapses late on Wednesday during the North American session, down by more than 1% against the US Dollar, following the release of US inflation data. Expectations for fewer rate cuts by the US Federal Reserve prompted a flight to the Greenback, which reached a new year-to-date (YTD) high via the US Dollar Index (DXY). The GBP/USD trades at 1.2534 after hitting a high of 1.2708.

The major drops below 1.2600, followed by the 200-DMA

The highlight of the day was that inflation in the US remains hotter than expected by the US central bank. The Consumer Price Index (CPI) rose by 0.4% on a monthly basis and 3.5% on an annual basis, exceeding expectations, a rise from the figures reported in the previous month. The core CPI also surpassed forecasts, maintaining a consistent rate of 0.4% MoM and 3.8% YoY in line with February's data.

That prompted investors to expect a less dovish Fed, as shown by Chicago Board of Trade (CBOT) data. December’s 2024 Federal funds rate (FFR) contract suggests that market players estimate the FFR to finish at 4.98%.

Recently, the latest Federal Open Market Committee Minutes revealed that policymakers would like to be more confident that inflation continues to decelerate before committing to ease policy. The minutes highlighted that almost all saw it appropriate to cut this year, though most saw upside risks in inflation.

GBP/USD Price Analysis: Technical outlook

The daily chart, suggests the GBP/USD has shifted neutral to downward biased, breaching key support levels, like the 200-day moving average (DMA) at 1.2585. Once surpassed, the next demand area would be the 1.2500 figure. A further downside is seen at .2448, the November 22 swing low, ahead of 1.2400. In the event of a bullish recovery, the 200-DMA is first resistance, followed by the 1.2600 mark. Once hurdled the GBP/USD, the next resistance would be the 50-DMA at 1.2661.

• GBP/USD trades with mild losses around 1.2675 on the consolidation of USD. 
• The Fed's Goolsbee said it must weigh how much longer it can maintain its current rate stance without damaging the economy.
• The UK’s OBR forecasts the UK economy to grow by 0.8% this year as domestic demand has rebounded. 

The GBP/USD pair trades with a mild negative bias near 1.2675 during the early Asian session on Wednesday. The USD Index (DXY) consolidates just above the 104.00 yardstick amid the cautious mood. Investors await the US Consumer Price Index (CPI) inflation data, along with the speech of Fed’s Bowman and Goolsbee later in the day. 

Some Federal Reserve (Fed) officials offered their hawkish language. Chicago Fed President Austan Goolsbee said on Monday that the recent jobs report was “quite strong”, but the central bank must weigh how much longer it can maintain its current interest rate stance without damaging the economy. Meanwhile, Minneapolis Fed President Neel Kashkari said that the labor market is no longer ‘red hot’ but remains tight. He said his base case is that inflation continues to ease.  

Financial markets have priced in close to 57% of a rate cut in June, while the chance of a July cut has fallen below 75%, according to the CME FedWatch Tool. All eyes will be on the US March CPI data as it might help the Fed to determine the path of monetary policy after the figure showed an increase of 3.2% YoY last month. The signs of persistent inflation and robust growth in the US might boost the Greenback in the near term.  

On the other hand, the latest forecast from the UK Office for Budget Responsibility (OBR) suggested the UK economy is forecast to grow by 0.8% this year as domestic demand has recovered. The nation’s monthly Gross Domestic Product (GDP) will be due on Friday. If it is the case that the GDP number is stronger than estimated, it might slow the easing cycle and lift the Pound Sterling (GBP) against the USD. Markets are currently pricing 75 basis points (bps) of the Bank of England (BoE) rate cuts this year, which would take the benchmark rate from its current level of 5.25% to 4.5%. 

• Sterling’s recovery falters at the 1.6680-1.6700 resistance area.
• An increasing risk aversion ahead of the US CPI release is supporting the USD.
• The broader trend remains negative while below 1.6680

The Pound has found some supply at levels right above the 1.2700 area before pulling back with investors cutting back short USD positions ahead of the US inflation release. The pair, however, remains moderately positive for the second consecutive day.

US CPI to set the Dollar’s near-term direction

All eyes are on the US Consumer Prices Index data, due on Wednesday, which is expected to confirm that price pressures remain steady well above the Fed’s target rate.

The USD risk is skewed to the upside, as recent US data has endorsed a “no landing” scenario, that would be confirmed in case of another upside surprise on inflation. Recent hints on wage growth and industrial prices are pointing to resilient inflation.

The technical picture shows the Pound under an increasing momentum, although the failure to confirm above the 1.6680-1.6700 area leaves the broader bearish trend intact. On the downside, supports are 1.6575 and 1.6535.

• GBP/USD gained ground on risk-on sentiment ahead of US consumer prices.
• CME FedWatch Tool suggests the likelihood of a Fed rate cut in June has decreased to 51.1%.
• BRC Like-For-Like Retail Sales grew by 3.2% YoY in March, marking the strongest growth since August 2023.

GBP/USD holds ground in the positive territory, hovering around 1.2650 during the Asian session on Tuesday. The pair gained ground on improved risk appetite ahead of Consumer Price Index data scheduled on Wednesday.

The US Dollar (USD) faces challenges amid market fluctuations, influenced by the cautious stance of the Federal Reserve. According to the CME FedWatch Tool, the probability of a 25-basis point rate cut by the Fed in June has decreased to 51.1%.

Federal Reserve (Fed) Bank of Minneapolis President Neel Kashkari emphasized the significance of the central bank's dedication to tackling inflation. He stressed that despite the current inflation rate hovering around 3%, the Fed must work towards bringing it back down to the target level of 2%.

In contrast, Chicago Fed President Austan Goolsbee offered a different perspective on Monday, stating that the economy is on a golden path. He emphasized that the economy remains robust due to a tight labor market.

On the other side, BRC Like-For-Like Retail Sales in the United Kingdom (UK) surged by 3.2% year-over-year in March, against the expected increase of 1.8% and 1.0% prior. This has marked the strongest growth since August 2023. This boost was largely attributed to an early Easter period, which led to increased food sales ahead of the extended weekend.

Moving forward, the Pound Sterling (GBP) could be influenced by the release of monthly Gross Domestic Product (GDP) and factory data for February, scheduled for publication on Friday. Bank of England Governor Andrew Bailey is expected to appear on Tuesday. However, he may not delve much into discussions regarding the economy or policy during this session.

Furthermore, investor expectations regarding the Bank of England (BoE) initiating interest rate reductions from the June meeting have intensified recently, spurred by mounting indications of easing price pressures.

• The Pound picks up with the USD weighed by a mild risk appetite.
• Investors are looking from the sidelines ahead of Wednesday’s US CPI data.
• GBP/USD’s broader trend remains bearish while below the 1.2685 resistance

The Sterling has opened the week on a slightly bullish tone. A somewhat softer US Dollar amid the moderate risk appetite has allowed the pair to extend its recovery from post-NFP lows, returning to the mid-range of the 1.2600s.

The Positive market sentiment is weighing on the US Dollar, yet downside attempts are likely to remain limited. Investors are expected to keep a cautious tone ahead of the release of the US Consumer Prices Index data on Wednesday.

On Friday, the unexpectedly strong US Nonfarm Payrolls confirmed the strong momentum of the US economy and cast further doubt on a Fed rate cut in June. In this context, another positive surprise on Wednesday might give a fresh impulse to the US Dollar. 

From a technical perspective, the pair is trading lower from early March highs. Resistance at 1.2680 is a key level to ease bearish pressure and aim for 1.2750, the 61.8% Fibonacci extension of the March selloff. Supports are 1.2575 and 1.2535.

• The Pound Sterling holds its rebound from seven-month lows against the US Dollar.
• GBP/USD stays cautious ahead of Wednesday’s US CPI inflation data.
• The Pound Sterling faces downside risks, as the daily RSI remains below 50.00.

The Pound Sterling (GBP) Is trading on the back foot against the US Dollar (USD), as the GBP/USD pair manages to hold above the 1.2600 level at the start of the week on Monday.

A negative shift in risk sentiment, despite easing Middle East geopolitical tensions, weighs on the higher-yielding Pound Sterling while the US Dollar struggles for traction amid the market’s nervousness ahead of Wednesday’s US Consumer Price Index (CPI) data.

From a short-term technical perspective, GBP/USD remains vulnerable and looks set to extend the downside break from the rising channel seen a couple of weeks ago.

The 14-day Relative Strength Index (RSI) indicator points lower below the midline, currently near 46.50, suggesting that risks remain skewed in favor of sellers.

Pound Sterling sellers, however, need to seek a daily candlestick closing below the horizontal 200-day Simple Moving Average (SMA) at 1.2587 to initiate a sustained downtrend.

The April low near 1.2540 could come to buyers' rescue then, followed by the 1.2500 round figure. Further south,  the 1.2450 static support will challenge the bullish commitments.

If buyers defend the 200-day SMA at 1.2587, it could alleviate the near-term selling pressure, allowing GBP/USD to attempt a comeback toward the static resistance shy of the 1.2700 level. 

GBP/USD must scale the critical confluence resistance at 1.2665 to add extra legs to the rebound toward 1.2700. The 1.2665 level is the intersection of the 100-day and 50-day SMAs.

GBP/USD: Daily chart

• The Pound has trimmed retraced post-NFP lows and is practically flat on the daily chart.
• Nonfarm Payrolls data shows that the US economy remains creating employment at a strong pace.
• A frail economic outlook and softer inflationary pressures are weighing on the Pound.

The Sterling is regaining lost ground on Friday’s US session following a significant reversal, with a strong US employment report sending the Dollar soaring. The pair, however, remains practically flat in the weekly chat after having whipsawed over the last few days.

US Nonfarm Payrolls increased by 303K in March beating expectations of a 200K increase to close a stellar quarter for employment. Wage inflation has continued growing, although the moderation observed in the yearly rate, which has eased to 4.1% from 4.3% in the previous month has eased concerns about a hawkish steer by the Federal Reserve.

In the UK the weak services sector activity data seen this week adds to the evidence of an uncertain economic outlook. The weak GDP and the slowing price pressures boosted speculation that the BoE might anticipate the first rate cuts, which is weighing on the Pound.

The technical picture remains bearish, with resistance at 1.2675 holding buyers ahead of 1.2755. support levels are  1.2575 and 1.2535.

• GBP/USD bounced off a key support level and rose up strongly this week. 
• Resistance from two major Moving Averages, however, prevented the trend from going higher. 
• A clear break above this resistance barrier would be required to confirm a move up to the range highs. 

GBP/USD has just bounced off the bottom of a medium-term consolidation range after forming a bullish Tweezer Bottom Japanese candlestick pattern.   

The pair rose up strongly on Wednesday and Thursday but then hit stubborn resistance at the intersection of two major moving averages – the red 50-day and blue 100-day Simple Moving Averages (SMA) – and stalled.

Pound Sterling versus US Dollar: Daily chart

The pair formed a bearish Shooting Star candlestick pattern on Thursday and is now trading just beneath it in the 1.2630s.

Given the firm floor of support at the 1.2550s, which has shown itself able to prop up price on at least three occasions since November 2023 it is likely to hold again, and the pair could be at the start of another move back up inside the range. 

However, the Moving Average Convergence/ Divergence (MACD) indicator, which is an especially useful confirmation tool for turning points in a range-bound market, has still not crossed its signal line to offer a buy signal. 

The 50 and 100 SMAs are also still providing a formidable resistance blockade above price, and ideally need to be penetrated decisively before a more bullish outlook can be adopted. 

A decisive breakthrough above the two SMAs – by which is meant a long green candlestick that breaches the resistance and closes near its high, or three green candlesticks that break through the level – would be required to confirm more upside. 

The March 21 high at 1.2804 presents as a possible target for such a revolution.

Alternatively, a decisive break below the range low at 1.2550 would lead to a volatile move lower, since support that has been retested on several occasions, when finally broken, usually ends up giving way in a dramatic fashion. 

• GBP/USD trades with mild losses near 1.2640 on the USD’s recovery on Friday.
• The US weekly Initial Jobless Claims rose last week to the highest since January.
• Investors expect the BoE to cut the rates in June as UK inflation is slowing consistently.

The GBP/USD pair trades with a mild negative around 1.2640 bias on Friday during the early Asian session. The modest rebound of the US Dollar (USD) to 104.20 amid the cautious mood provides some support to the major pair. Investors will closely watch the highly-anticipated US Non-farm Payrolls on Friday, along with the Unemployment Rate and speeches by Fed’s Musalem, Kugler, Barkin, and Bowman.

The US Initial Jobless Claims went up to a two-month high last week. The Labor Department on Thursday revealed that The number of Americans filing new claims for unemployment benefits for the week ended March 30 rose by 9,000 to 221,000 from the previous week of 212,000, below the market consensus of 214,000. Additionally, the Continuing Claims declined by 19K to 1.791M in the week ended March 23. The Greenback dropped below the 104.00 support level following the downbeat US economic data. However, the safe-haven USD pares losses as the fear of Iran's attack on Israel is driving the market.

According to the Express, the CIA has reportedly warned Israel that Iran will attack within the next 48 hours. This warning comes after Israel carried out an attack on Tehran's consulate in Damascus, Syria, killing two Iranian military leaders. The escalating geopolitical tension in the Middle East might boost the US dollar and act as a headwind for the GBP/USD pair.

On the other hand, the Pound Sterling (GBP) will be influenced by market forecasts for Bank of England (BoE) rate cuts. Investors anticipate the UK central bank to lower its borrowing costs in June as UK inflation is slowing consistently. The BoE Governor Andrew Bailey said in recent weeks that, due to further encouraging signs that inflation is cooling, the UK economy is moving towards the point where the central bank can begin cutting interest rates.

• The Pound takes advantage of US Dollar weakness to hit fresh two-week highs at 1.2675.
• A higher-than-expected increase in US Jobless Claims has increased bearish pressure on the Dollar.
• GBP/USD is testing an important resistance area at 1.2675.

The Sterling is building up bullish momentum on Thursday, buoyed by a favourable market sentiment, which is weighing on the safe-haven US Dollar.

Data from the US Labor Department revealed that Jobless Claims increased by 222K in the last week of March 29, from the upwardly revised 212K in the previous week. The market had anticipated a softer 214K increase.

Fed cut hopes are weighing on the USD

These figures together with the unexpectedly weak US Services data seen on Wednesday have restored investors confidence that the Fed might start cutting rates in June. This has improved risk appetite, capping the recovery of US Treasury yields and pushing the US Dollar lower.

Earlier this week, UK data showed that manufacturing activity expanded for the first time in the last two years. This has improved the outlook in the country’s economy, providing a fresh impulse to the Sterling.

The technical picture remains bearish, with the pair approaching an important support area at 1.2675-1.2695. Above here, the next target would be 1.275 and the March 21 high AT 1.2800. Supports are 1.2570 and 1.2535.

• GBP/USD received upward support after Wednesday's release of mixed US data.
• US Dollar faces downward pressure as several Fed officials have adopted a softer tone.
• Pound Sterling could face challenges on expectations of a rate cut by the BoE in June.

GBP/USD hovers around 1.2650 during the Asian session on Thursday. However, the US Dollar (USD) encountered challenges in the prior session following the release of mixed economic data from the United States (US), which showed a stronger ADP Employment Change but softer ISM Services PMI figures.

US ADP Employment Change increased by 184,000 in March, surpassing February's 155,000 rise and exceeding the market consensus of 148,000. Meanwhile, US ISM Services PMI declined to 51.4 in March from 52.6 in February, falling short of the anticipated 52.7.

The US Dollar Index (DXY) hovers around 104.20, by the press time, struggling to reverse recent losses. Multiple Federal Reserve (Fed) officials have adopted a softer tone regarding the trajectory of the Fed's interest rates. Fed Chair Jerome Powell reiterated the central bank's readiness to implement rate cuts, emphasizing a data-dependent approach.

Additionally, remarks from Atlanta Fed President Raphael Bostic, advocating for a rate cut in the final quarter of 2024, have drawn attention. Adriana Kugler, a member of the Fed Board of Governors, emphasized the ongoing disinflationary trend, suggesting that it would necessitate rate reductions. There are expectations of at least three cuts by the last quarter of 2024.

Global inflationary pressures seem to be subsiding, leading to speculation about potential interest rate cuts by central banks. BoE Governor Andrew Bailey has recently commented that, with further encouraging signs indicating a cooling inflation trend, the UK economy is progressing towards a point where the central bank could initiate interest rate cuts.

Money market futures traders anticipate a 25 basis point rate cut by the Bank of England (BoE) in June, with odds currently standing at 66%. Similarly, traders across the Atlantic have fully priced in a 25-basis point cut by the Federal Reserve in July. The anticipated rate cut by the BoE in June is expected to exert downward pressure on the British Pound (GBP). This leads to an undermining of the GBP/USD pair.