GBP/USD outlook: GBP slips despite UK economic growth

FX678 Finance ·  Apr 12 17:39

During the European session on Friday (April 12), GBP/USD began falling all the way during the midday Asian session. It fell below 1.2500 to 1.2490 during the intraday session, a decrease of 0.49%.

The current outlook for GBP/USD is pessimistic. Despite the UK economy growing for the second month in a row, GBP/USD fell into a downward spiral. Over the past few days, the dollar rebounded after the CPI report confirmed concerns about stagnant inflation.

The UK economy grew in February, indicating that it is gradually emerging from a mild recession. Investors, however, mostly ignored the report as they continued to digest recent US inflation data.

Investors changed their expectations for the Federal Reserve to cut interest rates after the US released the inflation report. Prior to the release of the report, it was more than 50% likely that the Federal Reserve would cut interest rates in June. However, this changed as the market expected to cut interest rates for the first time in September. Such a major shift caused yields and the dollar to rise, putting pressure on the pound.

Over the past few months, the pound has had an advantage over most G10 currencies due to the Bank of England's hawkish stance. However, the competitive environment has changed. Given recent data, the Federal Reserve's current position is tougher than the Bank of England.

Meanwhile, as UK inflation fell much faster than expected, the Bank of England became more dovish. Investors are now keeping a close eye on the UK's inflation and labour market data to be released next week. Despite this, traders delayed the Bank of England's first rate cut from June to August after the US released the inflation report. This is still ahead of the Federal Reserve, which is putting pressure on the GBP/USD price.

GBP/USD 4-Hour Chart


(Picture source: Yi Huitong)

From a technical point of view, the price of GBP/USD has fallen below the bullish channel and entered a stable downward trend. When the price reached the key resistance level of 1.2700, the trend reversed and the bears took control of the direction.

Strong bearish momentum has continuously broken below the channel support level and the 1.2551 support level. The bears are currently falling below 1.2500, and as an important level, the decline near this level may be suspended for a while.

The translation is provided by third-party software.

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