- GBP/USD is expected to decline to 1.3700 following a 2.7% year-on-year increase in core PCE.
- US consumer sentiment appears to be improving this June, with revised lower long-term inflation expectations.
- Advancements in China’s trade agreements with the EU may bolster the dollar toward the end of the month.
GBP/USD is likely to dip over 0.10% after hitting a near four-year peak of 1.3770 on Thursday, possibly settling around 1.3700 as the US dollar recovers some ground after the release of the US Core Personal Consumption Expenditure (PCE) Price Index for May. This situation seems to provide some support, alongside an uptick in consumer sentiment among American households.
Sterling is set to decline after gaining nearly four years as stronger US inflation and more positive consumer sentiment fuel a rebound in the dollar
The market sentiment remains somewhat optimistic as the core PCE in May climbed to 2.7% year-on-year, aligning with forecasts and April figures. Meanwhile, headline inflation for the same timeframe also rose by the anticipated 2.3%.
The University of Michigan recently indicated that consumer sentiment has seen a slight improvement in June, with the index moving from 60.5 to 60.7. However, inflation expectations have dropped, as households are now predicting a 5% rise in prices over the next year, down from 5.1%. Over the next five years, inflation is expected to decline to around 4%.
In related news, U.S. Secretary of Commerce Lutnick indicated that the US and China finalized trade agreements just two days prior, with more transactions on the horizon. Bloomberg has reported that the US and the European Union could finalize their trade agreement by the July 9 deadline.
Sterling continues to trend upward despite a generally weaker dollar. The US Dollar Index (DXY), which measures the dollar against a basket of six currencies, fell 0.07% to 97.28. Traditionally, the end of the month favors the dollar, though Barclays suggests it could remain weak until month-end.
In the UK, there’s currently a shortage of dockets. Analysts are closely examining Prime Minister Kiel Starmer’s fiscal budget, which is being described as having “a significant debt-to-GDP ratio and an overflowing current account deficit,” according to Rabobank.
GBP/USD price forecast: Technical outlook
The upward trend for GBP/USD remains, but after hitting a multi-year high close to 1.3770, it seems buyers are losing steam. That said, the momentum indicated by the relative strength index (RSI) suggests that bulls might be able to reach around 1.3800 in the near term.
Conversely, if GBP/USD drops below 1.3700, we could see a decline down to 1.3600. There’s also a 20-day simple moving average (SMA) sitting at around 1.3561. Should it remain higher, the next stop might be about 1.3510 on June 24.
British pound prices this week
The following table outlines the changes in the British pound (GBP) against major currencies this week, showcasing its strength particularly against the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -2.25% | -2.29% | -1.39% | -0.72% | -1.61% | -1.88% | -2.29% | |
| EUR | 2.25% | -0.06% | 0.93% | 1.58% | 0.62% | 0.39% | -0.07% | |
| GBP | 2.29% | 0.06% | 1.05% | 1.65% | 0.68% | 0.45% | -0.01% | |
| JPY | 1.39% | -0.93% | -1.05% | 0.65% | -0.27% | -0.46% | -1.01% | |
| CAD | 0.72% | -1.58% | -1.65% | -0.65% | -0.86% | -1.17% | -1.62% | |
| AUD | 1.61% | -0.62% | -0.68% | 0.27% | 0.86% | -0.25% | -0.69% | |
| NZD | 1.88% | -0.39% | -0.45% | 0.46% | 1.17% | 0.25% | -0.45% | |
| CHF | 2.29% | 0.07% | 0.01% | 1.01% | 1.62% | 0.69% | 0.45% |
The heatmap illustrates changes for various currencies. Selecting the British pound from the left and moving to the right for US dollars, for example, shows the rate of change in that box as GBP (base)/USD (QUOTE).
