British Pound Outlook: GBP/USD
GBP/USD extends the advance from the start of the month to register a fresh weekly high (1.3365), but the Bank of England (BoE) meeting may drag on the British Pound as the central bank is anticipated to lower UK interest rates.
British Pound Forecast: GBP/USD Rebound Persists Ahead of BoE
Keep in mind, GBP/USD bounced back ahead of the May low (1.3140) to keep the Relative Strength Index (RSI) above 30, and the oscillator may show the bearish momentum abating as it moves away from oversold territory.
UK Economic Calendar
In turn, GBP/USD may further retrace the decline from the July high (1.3789) as it breaks out of the range bound price action from earlier this week, but the BoE rate decision may sway the exchange rate as the central bank is expected to implement a 25bp rate-cut.
At the same time, the BoE is scheduled to release its quarterly Monetary Policy Report (MPR), and the updates coming out of the central bank may produce headwinds for the British Pound should the Monetary Policy Committee (MPC) prepare UK households and businesses for further rate-cuts in 2025.
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However, more of the same from the BoE may generate a bullish reaction in the British Pound as the central bank warns that ‘monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.’
With that said, a hawkish BoE rate cut may keep GBP/USD afloat as the central bank continues to combat inflation, but the exchange rate may struggle to retain the rebound from the monthly low (1.3142) as a potential head-and-shoulders formation seems to have taken shape.
GBP/USD Price Chart – Daily
Chart Prepared by David Song, Senior Strategist; GBP/USD on TradingView
- GBP/USD seems to be defending the May low (1.3140) as it climbs to a fresh weekly high (1.3365), and a close above 1.3310 (100% Fibonacci extension) may push the exchange rate toward the 1.3410 (78.6% Fibonacci retracement) to 1.3460 (23.6% Fibonacci extension) zone.
- A move/close above 1.3650 (38.2% Fibonacci extension) brings the July high (1.3789) on the radar, but lack of momentum to hold above 1.3310 (100% Fibonacci extension) may push GBP/USD back toward 1.3210 (50% Fibonacci extension).
- A move/close below the 1.3140 (78.6% Fibonacci extension) to 1.3150 (23.6% Fibonacci extension) region opens up 1.3010 (61.8% Fibonacci extension), with the next area of interest coming in around 1.2900 (23.6% Fibonacci retracement) to 1.2910 (50% Fibonacci extension).
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--- Written by David Song, Senior Strategist
Follow on Twitter at @DavidJSong
