Market Overview
On Wednesday in European trading, the GBP/USD exchange rate dropped by 0.25%, hovering around 1.3500. This decline can be attributed to the strength of the U.S. dollar (USD), which is experiencing upward pressure due to increasing expectations that the U.S. Federal Reserve will implement an interest rate hike at least once this year.
As of this moment, the US Dollar Index (DXY), which reflects the dollar’s performance against six major currencies, is up by 0.2%, sitting around 98.50.
The likelihood of a rate increase by the Fed this year has jumped from 23.5% to 35.6%, following the release of the latest Consumer Price Index (CPI) data in the U.S. On Tuesday, the data indicated that the headline CPI rose to 3.8% year-on-year, surpassing the expected 3.7% and the previous figure of 3.3%.
Meanwhile, in the UK, investors are closely watching for the release of the first-quarter gross domestic product (GDP) figures, expected on Thursday. Projections suggest a notable expansion of the UK economy at 0.6%, compared to just 0.1% growth in the final quarter of 2025.
GBP/USD Technical Details
The GBP/USD pair is currently around 1.3500. It hasn’t been able to exceed the 61.8% Fibonacci retracement level of the recent swing at 1.3602 and remains below the 20-day exponential moving average (EMA) at 1.3530, indicating a slightly bearish outlook in the short term.
The Relative Strength Index (RSI) is resting near neutral at 49.6, hinting that upward momentum might be losing steam. It could be that price gains will be limited until it surpasses immediate resistance influenced by both dynamic and Fibonacci levels.
Looking upward, the first resistance point seems to be around the 50% retracement level at 1.3518, closely followed by the 20-day EMA at 1.3530. More significant hurdles await at the 61.8% retracement near 1.3602, and further at 1.3721 and 1.3873, which correspond to the 78.6% and 100% retracement levels, respectively. On the other hand, initial support is seen at the 38.2% Fibonacci retracement near 1.3434, followed by a deeper support level at the 23.6% level around 1.3331. A drop below this point could expose further downside towards the structural anchor near 1.3163.
Economic Indicators
Gross Domestic Product (GDP)
The GDP, as reported by the Cabinet Office’s national statistics, measures the total value of all goods and services produced in the UK during a given period, both monthly and quarterly. It serves as a key indicator of economic activity in the UK. Typically, an increase in GDP is considered positive for the British Pound Sterling (GBP), while a significant decrease could be viewed negatively.
