- The GBP/USD outlook indicates a more dovish outlook for the Fed compared to that of the BoE.
- The US economy added only 22,000 new jobs in August.
- Market participants are expecting at least three Fed rate cuts before the year ends.
The GBP/USD outlook indicates a bullish momentum as the Fed outlook is more dovish than that of Bank of England. Downbeat US employment data on Friday has increased expectations for rate cuts in the US. On the other hand, high UK inflation is keeping BoE policymakers cautious.
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The pound extended gains on Tuesday as the dollar fell amid increased expectations for Fed rate cuts. The greenback’s collapse started on Friday after data revealed weak US employment in August. The economy added only 22,000 new jobs, missing the forecast of 75,000. At the same time, the unemployment rate increased to 4.3% as expected.
The report highlighted a rapid slowdown in the labor market, increasing pressure on the Fed to ease rates. After the data, market participants are expecting at least three rate cuts before the year ends. This is a more dovish outlook than the Bank of England’s.
In the UK, inflation remains high. Moreover, although the economy is slowing down, it is not alarming. As a result, experts believe the central bank might only deliver one more cut this year. Meanwhile, the US CPI report this week will continue to shape the outlook for Fed rate cuts.
GBP/USD key events today
Market participants do not expect any key economic releases today. Therefore, the pair might consolidate ahead of pivotal US inflation figures.
GBP/USD technical outlook: Channel breakout signalling bullishness
On the technical side, the GBP/USD price has broken out of its bearish channel and is challenging the 1.3575 key resistance level. The price trades far above the 30-SMA, with the RSI near the overbought region, indicating a strong bullish bias.
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Initially, the price was making lower highs and lows in a shallow downtrend within a channel. However, they could not continue this trend past the 1.3401 support. Bulls took over and pushed the price above the SMA and the channel resistance. The breakout is a sign that bulls are ready to resume their previous rally.
However, after such a steep move, the price could find it difficult to break past the 1.3575 resistance level. Therefore, it might consolidate for a while or pull back to retest the recently broken channel level before climbing to make new highs.
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