- GBP/USD declines following a Federal Reserve decision to maintain interest rates without guidance for September.
- US unemployment claims decrease to 218k, reflecting a robust labor market that supports the USD.
- Year-on-year Core PCE in June rises to 2.8%, with headline PCE at 2.6%, both figures exceeding estimates.
During Thursday’s North American session, GBP/USD experienced modest losses. This came after the Federal Reserve decided to hold interest rates steady on Wednesday, without offering any clues about its September plans. The dollar gained momentum, bolstered by positive employment figures and increasing inflation. Currently, the pair is trading at 1.3214, down from a peak of 1.3281.
STERLING slips to 1.3214 as the Fed stabilizes, PCE inflation rises, and labor data’s impact softens.
The Federal Reserve opted for a 9-2 split decision on Wednesday, with Governors Bowman and Waller advocating for a 25 basis point rate cut. Powell refuted suggestions from Trump about a potential easing in September, stating that decisions would be made based on each meeting.
A wave of economic data from the US hit the market. Unemployment claims for the week ending July 26 fell to 218K, which is lower than the anticipated 224K, preceding the non-farm payroll report set to be released on Friday.
Meanwhile, the Federal Reserve’s chosen inflation measure, the Core Personal Consumption Expenditure (PCE), rose from an estimated 2.7% in May to 2.8% in June. The headline PCE also increased, moving from 2.3% to 2.6%, exceeding the target of 2.5%.
Policy disparities suggest continued weakness in GBP/USD
This data diminished expectations that the Federal Reserve might lower interest rates during its September meeting. Current probabilities for maintaining the rates stand at 65%, with the likelihood of a cut at 35%. In the UK, expectations for the Bank of England to reduce rates to 4% at its August 7 meeting have been set at 80%.
Thus, the divergence between the two central banks hints that GBP/USD may trend downward.
GBP/USD price outlook: Technical perspective
GBP/USD aimed for a 1.3300 breakout but dipped below the 100-day simple moving average (SMA) at 1.3334. The relative strength index (RSI) shows a bearish trend, indicating that sellers may continue to press the price lower.
If GBP/USD breaks below 1.3200, the next level of support could be at 1.3100 before reaching the 200-day SMA at 1.2977. On the flip side, if buyers manage to close above 1.3250, a test of 1.3300 might be in the offing.
