- Britain and the EU reached a new trade agreement.
- The dollar was on track for a 2.5% monthly gain.
- Positive US data has boosted the case for an extended period of Federal Reserve hawkishness.
Today’s GBP/USD price analysis is bullish. The pound remained stable on Tuesday, holding onto gains made overnight after Britain and the EU reached a new trade agreement that boosted the prospects for the UK economy after Brexit and hinted at closer ties between London and the bloc.
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The dollar started the day fairly unchanged but was expected to conclude the month stronger, snapping a four-month losing trend.
The Windsor Framework was unveiled on Monday, a new agreement between Britain and the EU for Northern Ireland’s post-Brexit commercial arrangements. British Prime Minister Rishi Sunak said it would open the door for a new chapter in London’s relations with Brussels.
The opposition Labour Party has stated that it will support the deal in the upcoming vote in the British parliament.
Democratic Unionist Party (DUP) leader in Northern Ireland stated that his party was discussing the specifics.
The US dollar index was unchanged at the opening of trading. Still, it was on track for a 2.5% monthly gain, the first since last September, as investors increased their forecasts for how much further the Federal Reserve would need to hike interest rates to contain inflation.
A flurry of encouraging US economic indicators released in recent weeks has demonstrated the resilience of the largest economy in the world, boosting the case for a longer period of Federal Reserve hawkishness. The markets now predict that the Fed funds rate will peak at around 5.4% by September.
GBP/USD key events today
A report on consumer confidence in economic activity will be made public in the US. This leading indicator helps forecast consumer spending.
GBP/USD technical price analysis: RSI hinting bullishness
The 4-hour chart shows GBP/USD trading near the 30-SMA with the RSI slightly above the 50-mark. This follows a break above the SMA that showed a shift in sentiment to bullish. Bulls took over from bears at the 1.1951 support level. They were strong enough to push the price steeply and break above the 30-SMA.
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The price is currently retesting the 30-SMA, which might hold as support and allow the bullish move to continue to the 1.2128 resistance level.
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