GBPUSD Analysis: Economic Optimism Meets Dovish BOE Outlook

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By :  ,  Market Analyst
  • GBPUSD Analysis: focus remains on further progress for inflation rates versus the potential for early BOE rate cuts
  • GBP Construction PMI is back near 2023 highs
  • GBP GDP is expected to drive out of shallow recession

Contrary to the U.S economic data and Fed rate outlooks, the UK economy strikes a delicate balance between growth and inflation indicators. The BOE’s dovish stand supports the possibility of rate cuts before inflation reaches the 2 percent target, though the option to maintain rates persists.

  • From the perspective of leading economic growth figures, the GBP Construction PMI reported higher expansion metrics today, reaching a reading of 53, the highest since April 2023. This boosts confidence for the upcoming GDP results on Friday, as investors anticipate growth data beyond the shallow recession recorded in the previous two quarters.
  • From the perspective of inflation figures, UK CPI has dipped below the US CPI for the first time since 2022, marking its lowest level in two years, and enhancing the confidence for rate cut policies.

GBPUSD Analysis: Daily Time Frame – Logarithmic Scale

GBPUSD Analysis Daily Time frame

From a technical outlook, the bearish reversal of GBPUSD from its March high of 1.2893 has found support on the projected parallel channel bottom of its 6-month uptrend at the low of 1.23. With a climb back up to the mid-channel area, the 1.2635 high exhausted the uptrend with a significant shadow, leaving a question to the following uptrend. Neutral momentum can be interpreted with the relative strength index lying on the 50 level. From a longer-term perspective, a break below the 1.23 low can potentially find support near the 1.2210 and 1.2140 levels. From a positive momentum outlook, a break above the 1.2635 high can find potential resistance near 1.2730 and 1.2880, respectively.

GBPUSD Analysis: 4H Time Frame – Logarithmic Scale

GBPUSD Analysis hourly time frame

From a 4-hour standpoint, the relative strength index is at a neutral 50 reading as well. Considering two scenarios, a break below the 1.2530 low can potentially find support near the levels of 1.2470 and 1.24. From the upside, short-term resistance can be found near the latest high of 1.2635, with a potential for the next resistance at 1.27.

Reviewing the standpoint of the British Pound with inflation and interest rate figures, the BOE monetary policy and outlook is awaited with dovish anticipation.

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