Key Points:
- GBP/USD rose to 1.264, up 0.56%, after Fed officials’ comments and weak US services data.
- Fed Chair hinted at possible rate cuts, adding to market uncertainties and future expectations.
- Technical analysis suggests the GBP/USD pair is nearing key moving averages, with potential resistance at 1.2700.
This week, the GBP/USD currency pair witnessed notable movements, driven by Federal Reserve officials’ remarks and unexpected data from the US services sector. On Wednesday, the pair experienced notable success, starting from a low of 1.2539. Subsequently, they moved to a current level of 1.264, which marks an increase of 0.56%.
This rebound can primarily be attributed to several factors. Firstly, the market reacted to comments from Federal Reserve officials. Moreover, there was weaker-than-expected US services sector data. These developments seemed to dampen the dollar’s strength against the pound.
GBP/USD: 0.46% Slide in US Dollar Index Post Weak Services Data
As measured by the ISM Services PMI, the services sector’s performance was softer than anticipated, contributing to the bearish sentiment surrounding the US dollar. Concurrently, the US Dollar Index (DXY), which tracks the greenback against a basket of other major currencies, fell by 0.46% to 104.26, moving down from a previous high of 105.00. The unexpected ISM Manufacturing PMI results, which have become a critical trigger for currency movements in recent sessions, largely sparked this shift in sentiment.
Fed Officials’ Comments Hints Rate Cut Speculation
Statements from high-ranking Federal Reserve officials have also played a pivotal role in shaping market dynamics. Fed Chair Jerome Powell hinted that interest rates could be cut, depending on the data. Similarly, Raphael Bostic, the President of the Atlanta Fed, expressed support for just one rate cut, possibly towards the end of 2024. These comments have introduced uncertainty into the markets, prompting investors to adjust their expectations accordingly.
GBP/USD Nears 100-DMA at 1.2656, resistance at 1.2700
From a technical standpoint, the GBP/USD pair could soon test the 50-day moving average. The 200-day Moving Average (DMA) at 1.2586 and the 100-DMA at 1.2656 are key levels to watch. Analysts identify a potential resistance point at 1.2700 and observe support around 1.2500. Breaking through either threshold could significantly influence the pair’s trajectory, with a breach of resistance likely to encourage further upside, while slipping below support might lead to a retest of the 1.2500 level.
Future Rate Cuts Anticipated: BOE by June, Fed by July
Looking ahead, market expectations are being recalibrated in light of recent developments. Money market futures traders now anticipate a 25 basis points rate cut from the Bank of England by June, with a 66% probability. Similarly, expectations for the Federal Reserve indicate a 25 basis points cut fully priced by July 31. These forecasts reflect the market’s evolving view on central bank policies, driven by economic indicators, official statements, and technical analysis.
