GBPUSD stabilized on Tuesday as investors avoided aggressive trading ahead of the release of US consumer inflation data and Wednesday's FOMC interest rate decision. The data will help gauge the Federal Reserve's future monetary policy.
Optimistic data on US non-farm payrolls released on Friday reinforced expectations that the Fed will keep interest rates on hold. This supports the dollar's growth. According to CME FedWatch data, the odds of a rate cut in September have fallen to 50% and markets are pricing in a single 25 basis point cut this year, either at the November or December meeting.
On Tuesday, the U.K. will release its May employment report. Job growth on the island has been slowing, a trend that is likely to continue in May. The Bureau of Labor Statistics (BLS) is forecasting a decline of 100,000 jobs in the three months to April, following a 178,000 decline in the previous period.
A weakening labor market may allow the Bank of England to begin easing monetary policy. However, wage growth remains strong, supporting inflation. The BLS expects wage growth to rise to 6.1% in the three months to April from 6% in the three months to March. While the overall trend in wages remains downward, wages are still high for the Bank of England. The markets are not fully pricing in the possibility of a rate cut until November, although it is possible in June or August.
From a technical perspective, the GBPUSD rate is forming a bullish trend on the H4 timeframe. However, the divergence of the Relative Strength Index (RSI) indicator (standard readings) points to a possible change in the direction of the rate to the downside.
Signal:
Short-term prospects for GBPUSD suggest selling.
The target is at the level of 1.2525.
Part of the profit should be taken near the level of 1.2625.
A stop-loss could be placed at the level of 1.2860.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
