GBP/USD, as well as other financial instruments, strongly reflects the news background of the United States.
The Federal Reserve (Fed) continues its cycle of interest rate hikes amid falling commodities prices. In such conditions, an economic slowdown in the United States is a probable outcome.
According to Mike McGlone, macroeconomic strategist at Bloomberg Intelligence, the Fed and other central banks remain focused on tightening monetary policy. Assumptions about a major reset in the U.S. economy may be warranted, given China's release of weak manufacturing activity data and reduced commodity market liquidity.
Over the past two weeks, market expectations have shifted toward a rate hike by the Fed at its next meeting (June 13-14). CME FedWatch estimates a 65% chance of a 25 basis point increase.
Another issue regarding U.S. national debt is also affecting the value of GBP/USD.
A bipartisan agreement to suspend the U.S. national debt ceiling until January 1, 2025 is likely to face a number of difficulties when considered in the Democrat-controlled Senate and the Republican-controlled House of Representatives. The latter have expressed particular opposition to the deal.
The bill was considered Tuesday by the House Rules Committee prior to the vote itself.
Market participants have already taken into account the likelihood of a Fed rate hike and approval to suspend the U.S. debt ceiling, so the dollar index has slowed its upward dynamics.
Tomorrow at 8:30 GMT the U.K. manufacturing PMI will be released. This macroeconomic indicator reflects the current state of the economy and future prospects of doing business in the country. The PMI is expected to remain at 46.9; any deviation will increase volatility in GBP currency pairs.
GBP/USD broke out of its H1 time frame downtrend, indicating a possible change in the trend.
In terms of wave analysis, on the M30 timeframe the price is forming the fourth corrective wave.
The pair's quotations are testing the broken trend resistance, which is an obstacle for the current wave's decline. A departure to the fifth ascending wave in the range of 1.2360 -1.2380 is expected.
Signal:
GBP/USD short-term outlook is to buy.
The target is at the level of 1,2470.
Take profit could be placed near the level of 0,9120.
A stop-loss could be placed at the level of 0,9020.
The bullish trend is short-term, so trading volume should be no more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
