The GBP/USD currency pair surged to a resistance level of 1.2700 this morning, Thursday, amidst a weakening US dollar. This is the highest level for the pair in over a month, driven by a weaker US dollar after Federal Reserve Chairman Jerome Powell reassured that there was no imminent hike in US interest rates. The decline in US consumer prices also added pressure on the dollar, weakening expectations for continued aggressive rate hikes.
US CPI inflation rose 0.3% in April, below expectations and signaling hopes that the first-quarter surge in inflation was a blip. Investors now price in around 50 basis points of US monetary easing this year, aligning with the Fed’s projections of two rate cuts. In the UK, Bank of England chief economist hinted at the possibility of interest rate cuts over the summer, boosting confidence.
UK stocks are trading at record highs, with the FTSE 100 index reaching new highs. Market optimism was boosted by Powell’s reassurance that the central bank is unlikely to raise interest rates. Technical forecasts for the GBP/USD pair suggest caution against renewed profit-taking selloffs, with focus on US jobless claims, housing market, and industrial production figures.
Overall, the market is optimistic following recent developments in the US and UK economies.