GBP/USD Weekly Forecast: Recovering ahead of BoE, UK GDP data

• The Pound Sterling reached a three-week top against the Greenback.
• GBP/USD closed its second consecutive week of gains.
• Investors’ attention now shifts to the BoE gathering and the preliminary UK GBP data for the first quarter.

The British Pound (GBP) extended its march north against the US Dollar (USD) throughout the week, motivating GBP/USD to break above the 1.2600 figure for the first time since mid-April.

Meanwhile, the Pound Sterling experienced continued buying pressure against the US Dollar following an auspicious start to the week. This renewed upside bias coincided with diminished demand for the US Dollar, which was exacerbated in response to the dovish tilt (or at least not as hawkish as expected) by the Federal Reserve (Fed) at its meeting on Wednesday as well as by Chairman Jerome Powell at his subsequent press conference.

Absent important data releases in the UK economic calendar this week, the focal point of the past five days was the above-mentioned Fed’s event and Nonfarm Payrolls (NFP) on Friday, which showed the US economy added fewer jobs than previously anticipated (+175K) during April.

Also adding to the dominating appetite for the risk-linked galaxy, and hence, underpinning the bullish momentum around the British pound and its peers, geopolitical concerns, mainly in the Middle East, appeared to have entered a wait-and-see mode amidst some gradual progress towards a potential ceasefire between the conflicting parties.

Moving forward, the BoE and key UK GDP data

The upcoming week should be quite an interesting one for the quid, as the BoE meets on Thursday, and it is widely expected that the central bank will keep interest rate unchanged. Speculation among investors anticipates the first rate cut by the “Old Lady” in August or September, while another rate reduction appears fully priced in for December. On Friday, UK the Gross Domestic Product (GDP) release for the first quarter will also be on the traders’ radar, as it could show that the UK economy overcame the shallow recession it sank into during the second half of 2023. 

GBP/USD: Technical Outlook

The so-far May top at 1.2634 (May 3) is the upcoming resistance level for GBP/USD. A breakthrough above this level could prompt a revisit of the April peak at 1.2709 (April 9), likely followed by the weekly high of 1.2803 (March 21), and even extend to the 2024 top at 1.2893 (March 8). Further up, the pair could meet the weekly peak of 1.2995 (July 27, 2023), just below the psychological 1.3000 yardstick.

Conversely, initial support is found at the 2024 low of 1.2299 (April 22), followed by the weekly low of 1.2187 (November 10), and preceding the October 2023 bottom of 1.2037, and the crucial contention zone of 1.2000. Observing the daily chart, the Relative Strength Index (RSI) climbed beyond the 55 level.