• Investors are awaiting the US core PCE price index report for more clues on Fed policy.

• US GDP data came in lower than expected at 1.3% in Q1.

• Markets expect only 27 basis points of BoE rate cuts this year.

The GBP/USD price analysis shows bears in the lead as the dollar strengthens ahead of crucial US inflation data. On the other hand, the pound was weak despite the recent drop in Bank of England rate cut expectations.

The greenback recovered against the pound on Friday as investors awaited the US core PCE price index report for more clues on the Fed’s rate cut outlook. Forecasts show that the figure will hold at 0.3% from the previous month. However, there is a chance that it might surprise.

It has been a wild ride for rate cut expectations in the US as data has mostly been mixed. Last week, the dollar was rallying as business activity data came in higher than expected. Additionally, this week, there was a spike in consumer sentiment, leading to a decline in expectations for rate cuts.

Still, there have been signs that the robust economy is showing cracks that could prompt the Fed to cut rates this year. Notably, consumer inflation eased in April. Moreover, yesterday’s GDP data came in lower than expected at 1.3% in Q1 from a previous reading of 1.6%.

Meanwhile, in the UK, Bank of England rate cut expectations have fallen since the release of better-than-expected growth and inflation figures. Markets now expect only 27 basis points of rate cuts this year, which means one cut in 2024.

GBP/USD key events today

• US core PCE price index

GBP/USD technical price analysis: Price breaks below 30-SMA

On the technical side, the GBP/USD price has finally broken below and retested the 30-SMA, showing a new bearish sentiment. The decline came after the price found resistance at the 1.2800 key psychological level.

Bears had already started showing signs of a looming reversal when the price made a bearish engulfing candle. However, it continued higher as bulls struggled to hold onto control. Meanwhile, the RSI showed weaker bullish momentum as it made a bearish divergence.

Bears were finally strong enough to breach the 30-SMA support, retest it and are now looking to make a lower low. The bearish move will continue if the price breaks below the 1.2700 support level.

https://www.forexcrunch.com/blog/2024/05/31/gbp-usd-price-analysis-dollar-rises-in-wake-of-inflation-data/