The policy gap between the Federal Reserve (Fed) and the Bank of England (BoE) continues to weigh on GBPUSD. The latest reports from the United States point to a cooling economy, though inflation stubbornly sits above the target level, forcing the regulator to tread cautiously. With no rush to cut rates, Treasury yields stay elevated, and demand for the greenback remains strong. Meanwhile, the BoE could lower borrowing costs sooner than its American counterpart, as UK GDP growth keeps lagging behind that of the US.
The fragile state of the British economy also puts the pound under significant pressure. Recent data have once again confirmed this. The Purchasing Managers’ Index (PMI) slowed in both manufacturing and services, while consumers remained relatively constrained by high borrowing costs and a heavy household burden. That said, we may soon see the light at the end of the tunnel, as the BoE appears to be considering rate cuts in the coming quarters. Inflation in the country is still above the target but gradually easing. The only complication to this scenario is the escalating flare-up in the Middle East, which is drawing investors’ attention back to safe havens, including the dollar. Such an environment tends to increase pressure on GBPUSD.
From a technical perspective, the pair continues to trade slightly below the nearest resistance zone, remaining within a broader downtrend. The next target could be the 1.30000 support level, near yearly lows.
The final recommendation:
— Sell GBPUSD at the current price of 1.34000, aiming for 1.30000 within a month.
— Place a Stop Loss order at 1.35000, just above resistance, for better risk management if the market plays against us.
This content is for informational purposes only and is not intended to be investing advice.
