- UK retail sales rose 0.5% in July after dropping by 0.9% the previous month.
- UK GDP data revealed an expected 0.6% growth in Q2.
- All focus will be on Powell’s speech at the Jackson Hole symposium.
The GBP/USD outlook is bullish as the pound rallies amid a drop in BoE rate cut expectations. On the other hand, the dollar remained weak as investors fully priced in a 25 bps Fed rate cut in September.
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The pound has been bullish since last week when data showed that the UK economy was steady. Notably, UK retail sales rose 0.5% in July after dropping by 0.9% the previous month. The sales figures came after GDP data revealed an expected 0.6% growth in Q2.
A steady economy has lowered the chances that the Bank of England will implement another rate cut soon. The likelihood of a September rate cut fell to 37%. At the same time, investors expect 43 bps cuts in 2024. As BoE rate cut expectations fall, markets fully price a Fed cut in September.
The tides shifted last week after data showed a moderate increase in inflation, as expected. Although chances of a 50 bps cut dropped, traders increased their bets on a smaller rate cut. Fed policymakers are more confident that inflation will reach the 2% target. Therefore, investors believe they will start supporting the first cut in September.
Consequently, all focus will be on the Jackson Hole symposium, where Powell will speak. A more dovish speech will further weigh the dollar and boost the pound. At the same time, the FOMC policy minutes might contain clues about policymakers’ positions regarding rate cuts.
GBP/USD key events today
No key reports are scheduled for today. As a result, the pound will probably extend last week’s move.
GBP/USD technical outlook: Bulls aiming for 1.3000 level
On the technical side, the GBP/USD price is on a steep, bullish move well above the 30-SMA. At the same time, the RSI has climbed to the overbought region, showing a surge in bullish momentum.
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The rally pushed the price above a solid resistance comprising the 1.2900 level and the 0.618 Fib. If this move continues, the price will reach the 1.3000 key psychological level. However, if bulls get exhausted before then, GBP/USD might pull back to retest the 30-SMA support before climbing.
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