Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.2700.
- Add a stop-loss at 1.2550.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 1.2625 and a take-profit at 1.2550.
- Add a stop-loss at 1.2725.
The GBP/USD drifted upwards after the latest Federal Reserve minutes showed that officials expressed caution on the interest rate cuts outlook. The pair was trading at 1.2630 on Thursday ahead of the upcoming UK and US flash manufacturing and services PMI numbers.
Flash US and UK PMI numbers
The GBP/USD pair rose slightly after the latest Fed minutes. The Fed minutes showed that officials expressed caution about the start of rate cuts. Officials noted that the start of rate cuts would happen when they were confident that inflation was receding.
There are no signs that inflation is moving to the Fed’s target of 2.0%. The most recent data showed that the headline CPI rose to 3.1% in January, higher than the median estimate of 2.9%. Core inflation rose by 3.8%, almost double the Fed’s target of 2.0%.
This inflation was mostly driven by housing and services like insurance and there is little chance that these prices will moderate soon.
Therefore, there is a likelihood that the Federal Reserve will hold rates steady for a while until it sees inflation moving to the target of 2.0%. Analysts expect that the first interest rate cut will happen either in May or June.
The next important GBP/USD news will be the flash manufacturing and services PMI numbers from the UK. Economists expect the data to show that the two figures remained below 50 in January. The manufacturing PMI is expected to come in at 47.5 while the services PMI will be 54.2.
The other data will be the flash PMI numbers from the US. The manufacturing and services PMI is expected to be 50.5 and 52.4, respectively. These numbers will mean that the US economy is doing much better than the UK.
GBP/USD technical analysis
The 4H chart shows that the GBP/USD pair has drifted upwards in the past few days. As it rose, it moved above the important resistance point at 1.2597, its lowest point on January 17th. It has also formed an ascending channel and has moved slightly above the 25-period and 50-period moving averages.
The pair has also risen above the Supertrend indicator while the Percentage Price Oscillator (PPO) has jumped above the neutral point. Therefore, the pair will likely continue rising as traders target the next psychological level at 1.2700.
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