GBPUSD is moving in Descending channel and market has reached lower high area of the channel
GBP/USD Holds Steady Amid Market Anticipation
The GBP/USD pair has been showing a positive trend around 1.2860 during the Asian trading session on Friday. This comes as the US economy reported stronger-than-expected growth in the second quarter (Q2). With significant economic events on the horizon, let’s dive into what this means for the GBP/USD pair and the broader economic landscape.
US Economic Growth Surpasses Expectations
Strong Q2 Performance
The US economy has shown robust growth, expanding at an annual rate of 2.8% in Q2, according to the latest data from the US Department of Commerce. This marks a notable acceleration from the 1.4% growth recorded in Q1. The growth figures exceeded the market’s expectations of a 2% rise, highlighting a strong economic rebound.
Impact on the Federal Reserve’s Decisions
Despite the impressive growth numbers, the Federal Reserve (Fed) is still expected to consider an interest rate cut in September. Traders and market analysts will be paying close attention to upcoming economic indicators, particularly the US Personal Consumption Expenditures (PCE) Price Index data for June, which is scheduled for release soon.
GBP/USD Gains Amid BoE Rate Cut Expectations
GBP/USD Pair Performance
The GBP/USD pair has been gaining traction near the 1.2860 mark, breaking a three-day losing streak. This positive movement is largely attributed to the weakening of the US Dollar. However, the potential upside for the GBP/USD pair appears to be limited due to expectations that the Bank of England (BoE) might cut interest rates in August.
BoE’s Upcoming Policy Decisions
Economists are predicting that the BoE will reduce the bank rate to 5% at its meeting next week. This anticipated rate cut is seen as a response to inflation trends, which are expected to align closely with the central bank’s target. According to a Reuters poll, most economists believe that the BoE will implement a 25 basis points (bps) cut in early August, followed by another 25 bps reduction in November. This would bring the interest rate down to 4.75% by the end of 2024.
GBPUSD has broken Symmetrical Triangle in upside
Market Reactions and Economic Indicators
US Job Market and Durable Goods Orders
Recent economic data from the US has been mixed. The weekly Initial Jobless Claims for the week ending July 20 showed an increase to 235,000, which was slightly below the consensus of 238,000 but an improvement from the previous week’s 243,000. On the other hand, US Durable Goods Orders saw a significant decline, dropping by 6.6% in June compared to a modest 0.1% increase in May. This decline was much weaker than the expected 0.3% increase.
Economic Outlook and Market Sentiment
The mixed economic indicators have created a cautious market sentiment. While the strong GDP growth in Q2 has provided a positive backdrop, concerns about the labor market and durable goods orders are tempering the enthusiasm. Market participants are closely monitoring these developments to gauge the future direction of both the US and UK economies.
Final Thoughts
The GBP/USD pair’s current performance is influenced by a combination of stronger-than-expected US economic growth and anticipation of interest rate cuts by both the Federal Reserve and the Bank of England. As we move forward, the release of key economic data, such as the US PCE Price Index and BoE’s policy decisions, will play a crucial role in shaping market sentiment and determining the future trajectory of the GBP/USD pair.
In these uncertain times, it’s essential to stay informed and keep an eye on the evolving economic landscape. Whether you’re a seasoned trader or just starting, understanding these dynamics can help you make more informed decisions.
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