GBP/USD Forecast: Pound Sterling looks offered prior to BoE
- GBP/USD navigates its third consecutive session of losses.
- Weakness is expected to accelerate below the 200-day SMA.
- Markets’ attention shifts to the BoE’s Super Thursday.
So far on Wednesday, GBP/USD trades slightly on the defensive around the 1.2500 neighbourhood amidst rising investors’ prudence prior to the BoE’s Super Thursday.
Also adding to Cable’s downward bias is the continuation of the constructive trend in the Greenback, which remains propped up by further selling in the US bond market, which in turn morphs into an extra upside in US yields across the curve.
Still around the US Dollar (USD), Tuesday’s comments from Minneapolis Federal Reserve President Neel Kashkari appear to have lent extra legs to the currency after he expressed a more optimistic stance on the housing market’s resilience to monetary tightening while suggesting the possibility of further policy adjustments if inflation persists.
In the meantime, the broad-based narrative pointing to increasing policy divergence between the Federal Reserve (Fed) and the rest of its G10 peers continues to dominate market sentiment and is expected to keep the US Dollar on the positive foot in the near-to-medium term.
According to CME Group’s FedWatch Tool, there is around a 65% probability that the central bank will reduce its interest rates at the September 18 gathering.
Moving forward, the Bank of England (BoE) will reveal its monetary policy decisions later on Super Thursday. While the “Old Lady” is largely anticipated to keep its policy rate unchanged at 5.25%, the persistent decline in domestic inflation and expectations of a sustained drop in consumer prices in the next few months open the door to a potential dovish tone at the bank’s meeting, which could, in turn, keep the selling pressure around the British pound intact.
GBP/USD Technical Analysis
Immediately to the upside in GBP/USD now emerges the key 200-day SMA at 1.2542. Once the pair clears this region, it could then embark on a potential challenge of the so-far May top at 1.2634 (May 3). Further up comes the April peak at 1.2709 (April 9), ahead of the weekly high of 1.2803 (March 21). Extra gains from here should retarget the 2024 top of 1.2893 (March 8) prior to the weekly peak of 1.2995 (July 27, 2023), and the psychological 1.3000 yardstick.
Conversely, initial support is found at the 2024 bottom of 1.2299 (April 22), seconded by the weekly low of 1.2187 (November 10, 2023). If bears breach the latter, Cable could then attempt a move to the October 2023 bottom of 1.2037, ahead of the crucial contention zone of 1.2000. In addition, the day-to-day RSI slips back to around 46.