• Powell challenged market expectations, shattering hopes for an early Fed rate cut in March.
• Investors were eagerly awaiting the BoE policy meeting later today.
• The pound remains one of the best performers against the dollar this year in the G10.

The GBP/USD forecast revealed a bearish outlook as the pound lost its strength, succumbing to the relentless rally of the dollar. The FOMC policy meeting the day before saw Powell challenging market expectations, shattering hopes for an early Fed rate cut in March. Moreover, investors were eagerly awaiting the BoE policy meeting later today.

The Fed maintained its interest rates yesterday. Moreover, Powell stated they would not start cutting rates until they were confident inflation was declining to the 2% target. Consequently, bets for a March rate cut fell to 38% from 59% before the policy meeting.

Meanwhile, investors will look for hints on when interest rates in the UK will start falling at today’s BoE policy meeting. Notably, the pound remains one of the best performers against the dollar this year in the G10. Britain’s economy has recovered this year, and inflation remains relatively high. The PMI report from S&P Global released earlier in the year showed business activity at the highest level in seven months. Therefore, the BoE will likely keep interest rates unchanged. Additionally, investors expect the first rate cut to come in June.

Notably, after the December UK inflation figures, markets reduced expectations on the number of BoE rate cuts this year from 125 to 100 basis points.

There has been no guidance from BoE policymakers on the possible outcome of the policy meeting today. Therefore, analysts believe Thursday’s decision and messaging could cause a lot of volatility in the pair.

GBP/USD key events today

• BoE monetary policy meeting
• BoE Gov Bailey speaks
• US unemployment claims
• ISM manufacturing PMI

GBP/USD technical forecast: Price declines in a bearish channel

The pound is declining in a bearish channel on the charts after failing to go beyond the 1.2760 key resistance level. Moreover, indicators on the chart support a bearish bias as the 30-SMA is above the price while the RSI is in bearish territory below 50.

The price has fallen to retest the channel support. At this support, bulls might emerge to retest the channel resistance before the decline continues. However, if bearish momentum is strong, the price might break through the channel support to retest the 1.2600 key support level.

https://www.forexcrunch.com/blog/2024/02/01/gbp-usd-forecast-powell-dims-march-rate-cut-prospects/