Optimistic Outlook
- Buy the GBP/USD pair with a target at 1.3675.
- Set a stop loss at 1.3425.
- Expected timeframe: 1-2 days.
Pessimistic Outlook
- Sell GBP/USD pairs targeting 1.3425.
- Place a stop loss at 1.3675.
The GBP/USD pair gained momentum as investors focused on earlier highs, thanks in part to a weaker US dollar. The pair peaked at 1.3568 on Thursday morning, rising from a low of 1.3135 earlier this month.
Upcoming UK GDP Data
The exchange rate climbed as traders anticipated forthcoming economic indicators from the UK. Experts expect that preliminary results will show a slowdown in the UK economy for the second quarter, confirming concerns about stagnation.
Current estimates suggest a growth of 0.1% in the first quarter, a drop from 0.7% in the previous quarter. Annual inflation is projected at 1%, down from 1.3%.
If the actual figures come in at or below these forecasts, it could signal a stagnant economy marked by slow growth and relatively high inflation. Recent data indicated that inflation in June rose to 3.6%, significantly above the Bank of England’s 2% target.
Stagflation poses a major challenge for central banks, which is evident from the divisions observed in the Bank of England’s latest meeting.
In a stagflation scenario, the bank faces a tough choice between reducing rates to stimulate growth or risking exacerbating inflation.
The GBP/USD pair is also being influenced by increased expectations that the Federal Reserve may lower interest rates in September following disappointing non-farm payroll numbers that were influenced by Donald Trump’s actions.
Additionally, the recent US inflation report revealed that inflation is rising at a slower-than-anticipated rate, with the headline Consumer Price Index unchanged at 2.7%, while the core index rose to 3.1%.
GBP/USD Technical Overview
Analysis of daily charts indicates that the GBP/USD exchange rate has seen a recovery over the past couple of years. There’s been a double bottom pattern noted at 1.3135, the lowest points recorded in May and this month. The neckline of this pattern sits at 1.3787, which reflects the peak from July 1st.
The pair has approached weak points in the Murrey Math Lines, slightly above the 50- and 100-day moving averages. This suggests the potential for continued upward movement as buyers aim for resistance at 1.3670.
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Crispus Nyaga is a financial analyst and trader, bringing over eight years of industry experience. He’s worked with notable companies like ATFX, Easymarkets, and Octafx. In his downtime, he enjoys watching golf and spending time with his family.
