• Data revealed further contraction in the US manufacturing sector.

• Traders are pricing in a 59.1% chance of a Fed cut in September.

• Surveys showed a decline in British sales in May.

The GBP/USD outlook shows solid bullish momentum as the dollar trades near multi-month lows amid more signs of economic weakness. However, the pound pulled back slightly amid signs of weaker UK consumer spending in May.

The dollar fell on Monday after data from the Institute of Supply and Management revealed a further contraction in the manufacturing sector. The ISM PMI fell from 49.2 in April to 48.7 in May, showing the impact of high borrowing costs. This was the second month of contraction and could pile pressure on the Fed to start cutting interest rates. As a result, traders are pricing in a 59.1% chance of a cut in September, up from 55% before the report. Moreover, they expect total reductions of 41 basis points in 2024.

This came after the inflation report on Friday, which showed a slight easing. If this trend continues, there will be a greater chance that the Fed will implement two rate cuts this year. The next big test will come on Friday when the US will release its monthly employment report. Policymakers will pay close attention to see whether the crack seen in the labor market last month will continue or not.

Meanwhile, surveys by Barclays and The British Retail Consortium in the UK showed a decline in British sales in May. The decline came due to the effects of wet weather across Britain.

GBP/USD key events today

• US JOLTS job openings

GBP/USD technical outlook: Bears reject break above 1.2800 resistance

On the technical side, the GBP/USD price has punctured the 1.2800 resistance level before pulling back below. This is a sign the price has been rejected above 1.2800, and bears could attempt a takeover.

Previously, the price was trading in a solid bullish trend that paused at 1.2800. At this point, bears took over with a break below the bullish trendline and the 30-SMA support line, intending to reverse the trend. However, they could not go below the 1.2700 support level to make a lower low.

This allowed the bulls to make another attempt at breaking above 1.2800. However, the RSI has made a slight bearish divergence, indicating weaker bullish momentum. If this plays out, bears might revisit the 1.2700 support level.

https://www.forexcrunch.com/blog/2024/06/04/gbp-usd-outlook-dollar-struggles-near-lows-after-dismal-pmi/