- For two days in a row, the price of the GBP/USD currency pair is trying to compensate for its sharp losses, which affected the 1.2797 support level.
- The retracement gains did not exceed the 1.2903 level, which is stable around it at the time of writing the analysis, ahead of an important reaction of investors to the US Federal Reserve policy update.
- The UK and Eurozone economies are slowing down, but Britain seems to be more flexible at this point and should push the Bank of England to maintain a more “hawkish” policy stance that could support the pound more.
Following the World Economic Outlook report from the International Monetary Fund. The chief economist of the organization said that global economic growth will witness a slight improvement compared to the previous forecasts of the International Monetary Fund, but “many challenges are still on the horizon, and it is too early to celebrate.”
Accordingly, the economist at the International Monetary Fund, Pierre-Olivier Gorinchas, presented his assessment as the organization expected global economic growth to slow to an estimated 3% in 2023 and 2024, down from 3.5% in 2022.
The International Monetary Fund also expects global inflation to decline from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. The organization's economists added that when the United States was able to fend off an unprecedented default by resolving the debt ceiling crisis earlier in this summer, that has partially mitigated downside risks to the outlook. But he emphasized that the risk of high inflation due to Russia's invasion of Ukraine and severe weather could prompt global central banks to raise interest rates or cause world leaders to enact more restrictive economic policies. In addition, the International Monetary Fund said that China's slow recovery after reopening its economy after the epidemic "shows signs of losing strength."
In general, the US economy has proven surprisingly resilient in the face of sharply rising borrowing costs. With employers adding a solid 278,000 monthly jobs so far this year. At 3.6% in June, the unemployment rate is not far from its lowest level in half a century.
Federal Reserve Chairman Jerome Powell and other officials will meet this week to make their final decision on interest rates, hoping to achieve a "soft recession," the goal of reining in inflation without causing a deep recession.
GBP/USD Technical Outlook
According to the performance on the daily chart below, the GBP/USD gains will not amount to changing the general trend to bullish without stability above the psychological resistance of 1.3000, which may support the bulls in further progress upwards.
On the other hand, over the same period of time, the return of the currency pair to the support area of 1.2750 will end the current rebound expectations. A move toward the support level of 1.2590 will push the technical indicators toward strong oversold levels. The future of central bank tightening will remain an important factor in determining the direction of the currency pair in the coming period.
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