• Wednesday’s data revealed weaker US economic growth in the first quarter.

• A measure of US core personal consumption expenditures jumped by 3.7%.

• Investors are cautious ahead of today’s core PCE price index report.

The GBP/USD outlook remains bullish as the dollar loses ground following a disappointing gross domestic product report. However, the inflation figures buried within the report triggered a notable shift, dampening expectations for a Fed rate cut. As a result, investors are eager to receive the core PCE price index figures from the US.

Wednesday’s data revealed weaker US economic growth in the first quarter. The gross domestic product grew at an annual rate of 1.6%, missing forecasts for 2.4%. This indicates a slowdown in the economy that would have given policymakers confidence that inflation would reach the 2% target.

However, within the same report, a measure of core personal consumption expenditures rose by 3.7%, beating forecasts for a 3.4% increase. The increase indicates hotter-than-expected inflation. The Fed will hesitate to cut interest rates if inflation remains stubborn and persistent.

Consequently, investors are cautious ahead of today’s core PCE price index report. The GDP figures increased fears that today’s report will also show a bigger-than-expected increase in inflation.

After the GDP report, markets lowered the likelihood of a Fed rate cut in September to 58% from 70%. Meanwhile, the chances of a cut in November increased to 68%. This puts the Fed in a more hawkish position than the Bank of England, which might cut in June or August. Consequently, there might be more declines in the GBP/USD pair.

GBP/USD key events today

• US core PCE price index m/m
• US revised UoM consumer sentiment

GBP/USD technical outlook: Bulls approach solid resistance barrier

On the technical side, the GBP/USD price is bullish as it climbs higher above the 30-SMA. At the same time, the RSI indicates solid bullish momentum as it trades well above 50. The recent shift in sentiment has allowed bulls to target the 1.2550 critical resistance level. This would allow the price to retrace 61.8% of the previous downtrend.

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However, this means a strong resistance barrier. If the price fails to break above, it might pause to retest the 30-SMA. Meanwhile, if bullish momentum remains strong, a break above 1.2550 would allow the price to target the 1.2701 resistance.

https://www.forexcrunch.com/blog/2024/04/26/gbp-usd-outlook-dollar-slides-on-disappointing-gdp-figures/