GBP/USD declines amid strengthening of the US dollar | 30 May 2024

Events to pay attention to today:

15:30 GMT+3. USD - GDP q/q

17:00 GMT+3. USD - Pending Home Sales m/m

18:00 GMT+3. USD - EIA Crude Oil Stocks Change

GBPUSD:

The GBP/USD pair is declining to 1.2695 during the early Asian session on Thursday. The decline in the pair is supported by a stronger US Dollar (USD) amid rising US yields and lower bets on a Federal Reserve (Fed) rate cut in September.

In recent weeks, Fed officials have been cautious on the inflation outlook, prompting traders to cut bets on an easing cycle this year. The CME FedWatch Tool indicates that markets are pricing in a 50% chance that the Fed will keep interest rates unchanged in September. The combination of the Fed's cautious stance and stronger US economic data has provided some support for the US dollar in previous sessions.

On Thursday, investors will be focused on the second estimate of US gross domestic product (GDP) for Q1 2024, which is expected to grow by 1.3%. Should the report show stronger-than-expected data, this could further strengthen the US dollar and create a headwind for GBP/USD. Additionally, later in the day, the US will release weekly data on initial jobless claims, trade balance and pending home sales. Fed officials Rafael Bostic, John Williams and Laurie Logan are also scheduled to speak.

With regard to the British pound, there is growing speculation that the Bank of England (BoE) will commence cutting interest rates at its August meeting due to a worsening outlook for UK inflation. The International Monetary Fund (IMF) had previously forecast two to three rate cuts from the Bank of England. In the absence of important economic data releases from the UK, election speculation could weigh on the Pound Sterling (GBP). The potential for political uncertainty to negatively impact the Pound Sterling and limit its near-term growth is a key concern.

Trading recommendation: Trading mainly by Sell orders from the current price level.

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