Current week’s events might intensify the fall in GBPUSD

The GBPUSD currency pair continues to decline from its yearly high at 1.268 recorded on May 10. Currently, the first downside target at the 23.6% Fibonacci level (1.247) is reached, and there is the way to the level of 1.2345. This week is full of events for both American and British economies, which might cause higher volatility in the GBPUSD prices.

Last week was marked by a steady growth of the dollar against almost all other currencies, including the pound. The U.S. currency lost some of its gains only on Friday. It was driven by Fed Chairman Jerome Powell’s speech. He noted the sufficient degree of monetary policy tightening, which does not necessarily require further interest rate hikes.

Even though Powell’s comments lowered the probability of rate increases at the Fed meeting on June 14 from 40% to less than 15%, market participants' longer-term expectations continued to worsen. According to a survey published by the National Association for Business Economics (NABE), economists now project the monetary policy easing cycle to begin no earlier than the first quarter of 2024. In previous forecasts, the first reduction in interest rates was expected as early as the fall.

Tomorrow is important for the short-term GBPUSD dynamics. PMI data will be published in the U.S. and U.K., showing business activity in the industrial and services sectors. However, the release of inflation statistics for April on Wednesday will be even more important for the pound. Prices were expected to slow down sharply from 10.1% to 8.3%. If the real figures are in line with expectations or lower, GBPUSD could accelerate its decline.

As long as the pound in pair with the dollar has not returned above 1.25, the initiative will remain with the sellers of the British currency. Their next target will be the 38.2% Fibonacci retracement level (1.2345).

The following trading strategy may be offered:

Sell GBPUSD below the level of 1.247. Take profit – 1.2345. Stop loss – 1.25.

Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.