GBP/USD rises above 1.2850 ahead of US PCE data | 26 July 2024

Event to watch out for today:

15:30 GMT+3. USD - Core PCE Price Index

GBPUSD:

The Pound-Dollar pair consolidated near 1.2860 on the back of a weaker US Dollar, breaking a three-day losing streak during Asian trading on Friday. However, the upside potential of the major pair seems limited as market participants expect the Bank of England (BoE) to cut interest rates in August.

The U.S. economy grew faster than expected in the second quarter, according to the U.S. Commerce Department's preliminary estimate released on Thursday. U.S. gross domestic product (GDP) grew at an annualized rate of 2.8% in the second quarter, marking an acceleration from 1.4% growth in the first quarter. The figure was above the forecast of 2%.

Nevertheless, expectations for a September interest rate cut by the Federal Reserve (Fed) remain unchanged. Traders will be closely watching the release of US Personal Consumption Expenditures (PCE) data for June, which is due on Friday.

In addition, weekly U.S. initial jobless claims for the week ended July 20 rose 235,000 from the previous week's 243,000. The figure was below the consensus forecast of 238,000. Meanwhile, U.S. durable goods orders fell 6.6% in June compared to May's 0.1% increase, which was weaker than expectations of 0.3%.

As for the British pound, the Bank of England (BoE) is expected to cut the bank rate to 5% at its August meeting next week as inflation is expected to be near the central bank's target, according to most economists polled by Reuters. In addition, analysts at UBS said the Bank of England is expected to make its first rate cut of 25 basis points (bps) in early August and another 25 bps in November, bringing the interest rate to 4.75% by the end of 2024. “The key reason why we expect the MPC to cut rates is the recent data,” said UBS analysts.

Trading recommendation: Watch the level of 1.2860, on the rebound take Sell positions. If we consolidate above, take Buy positions.

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