- Traders withdrew bets on interest rate cuts in the UK and US.
- US GDP statistics exceeded expectations, indicating strong economic performance.
- Market participants expect the BoE to keep interest rates on hold next week.
The weekly forecast for GBP/USD is neutral as the resilience of both the US and UK economies creates a level playing field for the currencies.
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GBP/USD ups and downs
The pound ended the week flat as the UK and US economies showed resilience. Business activity in both countries’ manufacturing and service sectors increased. As a result, traders withdrew bets on interest rate cuts in the UK and US.
Further data from the US confirmed the view that the Fed will not start cutting rates in March. GDP statistics exceeded expectations, indicating strong economic performance. Meanwhile, the Fed’s preferred inflation measure was in line with expectations.
GBP/USD major events next week
Major reports from the US are scheduled for next week, including FOMC minutes, ISM manufacturing PMI, and employment statistics. Meanwhile, traders will be paying close attention to the UK’s Bank of England policy meeting. On February 1, the BoE is likely to keep interest rates at 5.25%. At the same time, investors will closely monitor any signs regarding the timing of a potential rate cut.
Meanwhile, clues about the possibility of a Fed rate cut can be found in the FOMC minutes and NFP report. Another positive employment report could further dampen expectations for a rate cut, leading to a fall in the currency pair. The opposite is also true.
GBP/USD Weekly Technical Forecast: Bullish momentum weakens around 1.2800
The pound remains firm within a narrow range with support at 1.2600 and resistance at 1.2800. The bullish trend gradually weakened as the price approached 1.2800. The price started hovering around the 22-SMA until it started to tear through the line. This indicates a transition from a trend market to a range market.
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If this is a pause in the bullish trend, the price will eventually break above the range resistance and continue rising. But there are also signs that bears may be taking over. The RSI shows a bearish divergence from the price, indicating that the bullish momentum is weakening. Therefore, if the bulls fail to regain momentum, the bears may break below the range support and a new downtrend begins.
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