GBPUSD made marginal gains in the European trading session on Monday. The cable traded at 1.2746, having risen marginally by 0.08% at the time of writing. The pair spent most of last week on a downtrend, as the dollar gained from falling expectations of a June Fed interest rate cut.
The market has grown less confident of a rate cut by the Federal Reserve, as inflation remains well above the 2% target rate. In addition, the jobs market is relatively stable, and this has helped to cool concerns over a higher-for-longer policy. The US Interest rate decision will come out on Wednesday, but there’s likely to be limited volatility on the back of recent data.
The BoE, on the other hand, has indicated that it is in no hurry to cut interest rate without a solid proof of economic stability. The UK economy contracted in the last two quarters, and this will play a role in arriving at the next interest rate decision. The BoE is largely expected to retain the current interest rate for at least another quarter, and it expects to achieve the 2% inflation target in the second quarter of 2024, matching the Office for Budget Responsibility’s (OBR) forecast.
GBPUSD’s upside on Monday will be curtailed by rising US Treasury yields and potential safe haven purchases underpinned by growing tensions around the Israel-Hamas war. The war took a new twist over the weekend after Israel PM Benjamin Netanyahu reiterated intension to land troops in Rafah.
Technical analysis
GBPUSD has its pivot at 1.2760, and the RSI lacks upward momentum. This will likely put the sellers in control, with the first target being the support at 1.2710. Extended control by the bears at that point will break the support and set the pair on course to test 1.2690. Alternatively, the buyers could take control if they push action above 1.2760. That will likely build the momentum to attempt breaking 1.2780 and test 1.2800 in extension.
