- The GBP/USD outlook shows a solid rebound in the UK economy.
- Data on Thursday revealed that the UK economy expanded by 0.4%.
- Top US government officials are calling for a big rate cut.
The GBP/USD outlook shows a solid rebound in the UK economy that has lowered BoE rate cut bets and boosted the pound. At the same time, the UK currency is climbing as the dollar remains weak amid a surge in Fed rate cut expectations.
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Data on Thursday revealed that the UK economy expanded by 0.4% on a monthly basis, beating forecasts of 0.2%. Moreover, it was a significant improvement from the previous month when the economy shrank by 0.1%. The upbeat data eases pressure on the Bank of England to cut interest rates. Already, policymakers are worried about the high inflation. A strong economy would allow them to delay rate cuts and let price pressures drop.
Meanwhile, the dollar remained weak after soft inflation figures led to a surge in Fed rate cut expectations. Currently, market participants are almost fully pricing a rate cut in September. Moreover, the probability of the Fed’s 50 bps cut is now 7%.
After the weak jobs data, political pressure has mounted, and top government officials are calling for a big rate cut. Treasury Secretary Bessent said the central bank might need to cut rates by 50 bps to make up for lost time.
GBP/USD key events today
- US core PPI m/m
- US PPI m/m
- US unemployment claims
GBP/USD technical outlook: Overbought near the 1.3575 resistance
On the technical side, the GBP/USD price has made new highs, pausing near the 1.3575 key resistance level. The price now sits well above the 30-SMA, showing bulls have a strong lead. Meanwhile, the RSI trades in the overbought region, suggesting solid bullish momentum.
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Bulls have kept up a solid rally, with the price trading above the 30-SMA, with few pullbacks. However, the most recent swing high has pushed the price to overbought levels. Therefore, bulls might need some time to breathe before continuing.
At the same time, the fact that the price has reached the 1.3575 key resistance level means some buyers will start taking profits. This might cause a pause or pullback before the trend continues. A break above the resistance will solidify the bullish bias.
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