- Speculators anticipate further drastic rate cuts from the Federal Reserve.
- Shares of PacWest Bancorp fell on Thursday, dragging other regional banks down.
- The services sector in Britain experienced its highest growth in a year at the beginning of Q2.
Today’s GBP/USD outlook is bullish. The dollar dropped as speculators anticipated further drastic rate cuts from the Federal Reserve. Investors have been on edge due to a worsening regional bank crisis in the United States. There is increasing pressure on American authorities to do more to support the industry.
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Shares of PacWest Bancorp fell on Thursday, dragging other regional banks down after the bank announced plans to explore strategic options. This announcement heightened investor fears.
Since then, traders have priced further drastic rate cuts from the Fed.
With the help of new orders, the services sector in Britain experienced its highest growth in a year at the beginning of the second quarter. However, it transferred the expense of growing wage costs onto consumers. The Bank of England is under more pressure to raise interest rates.
The reading was another step upward for the economy, which had previously looked like it might experience a recession in early 2023.
According to a survey conducted by the BoE of businesses on Thursday, companies’ projections for pay growth and inflation in the upcoming year dropped. Still, their expectations for selling prices remained high in April.
The BoE keeps an eye on wage growth and company profit margins as it works to bring double-digit inflation back to its 2% objective. The bank is poised to raise its Bank Rate to 4.5% next week.
GBP/USD key events today
Today investors will focus on the US nonfarm payrolls report. This report will likely cause a lot of volatility if the value is higher or lower than expected. A lower value would increase rate-cut bets and push GBP/USD higher.
GBP/USD technical outlook: Bullish bias stronger above 1.2575.
The pound has broken above the 1.2575 resistance in the 4-hour chart. This has strengthened the bullish bias, with the price pushing further away from the 30-SMA. The RSI has also risen far above 50, indicating that bullish momentum is stronger.
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The price is currently trading near the 1.2625 level and will likely break above. However, if it pauses at this level, we might see a pullback to retest the 1.2575 before the price climbs to make a higher high.
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