- The dollar resumed its advance ahead of the Federal Reserve statement later today after early week losses that had pushed GBP/USD to resistance at 1.2570 and back into its broader bearish channel to support at 1.2467 at the time of writing.
- Developments still suggest that the Bank of England may be thinking of cutting rates soon.
- However, the fact that services inflation is approaching 6.0% has prompted analysts at BCA Research to warn investors that investors are still expecting a lot of rate cuts in 2024.
GBP/USD will be looking to the Fed's rate decision today, where policymakers are likely to reiterate the strong data that means no imminent rate cuts are likely. Concurrently, the market has already digested the idea that rates won't be rising any time soon, and now sees December as the start date. Given the amount of repricing - and the strength of the dollar - it's hard to see how the Fed could deliver anything new that would materially lift the dollar.
Consequently, this should keep GBP/USD relatively well supported into the new month.
The US non-farm payrolls update on Friday will be the last major market event for the week, and another reading above consensus could lead to a rise in the price of the US dollar and a decline in “high beta” currencies as markets begin to consider the possibility of the first cut occurring only in 2025. But as “Expectations are already high – and rising – in the face of big data surprises,” analysts at Barclays note.
Any miss on the numbers could accelerate the recent GBP/USD and other dollar-based currency rebounds.
In other news, the S&P 500 closed down 1.6% on Tuesday, the Nasdaq lost 2%, and the Dow Jones fell 570 points as investors assessed economic data showing rising labor costs and falling consumer confidence ahead of the Fed decision. Labor costs in the US rose more than expected in the last quarter, by 1.2%, suggesting rising wage pressures, and US consumer confidence fell to its lowest level in over a year and a half.
In earnings news, McDonald's stock fell 0.2% despite revenue falling below estimates due to the boycott in the Middle East. Also, GE Healthcare stock fell by 14.3% after a decline in first-quarter revenue. Coca-Cola shares lost 0.4% despite beating estimates and improving its outlook. Conversely, 3M stock jumped 4.9% on upbeat results and Eli Lilly stock rose 6% after earnings per share beat expectations for higher weight-loss drug sales. Meanwhile, Amazon, AMD, Starbucks, and PayPal are scheduled to report after the closing bell. In April, the S&P 500 and Nasdaq fell 3% each, while the Dow Jones fell 4.3%, marking its worst month since September 2022.
Technical forecasts for the GBP/USD pair today:
We still see that the general downward trend for the price of the British pound against the US dollar GBP/USD is still continuing and may remain so as long as the price is stable around and below the support level of 1.2500. Currently, the opportunity to move to break the psychological support of 1.2300, most prominent on the daily chart is strongly present, as the price of the US dollar is still receiving strong momentum from the demand for it as a safe haven. In addition, the US Federal Reserve is far from the pace of reducing interest, in contrast to the matter with the Bank of England. On the other hand, the current downward trend will not be broken without the bulls moving the currency pair above the resistance 1.2720.
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