• Headline UK inflation returned to the 2% target for the first time in about three years.

• Economists expect the first BoE rate cut in August and at least two this year.

• The likelihood of a Fed cut in September is 67%.

The GBP/USD forecast shows downside potential as the pound declines ahead of the Bank of England policy meeting. Meanwhile, the dollar held steady as traders waited for more economic data to provide clues on the path of US monetary policy.

After the UK inflation report, investors are eagerly awaiting the BoE policy meeting. Although headline inflation returned to the 2% target for the first time in about three years, underlying price pressures remained hot, causing a decline in BoE rate cut expectations.

A Reuters poll on Wednesday showed that economists expect the first rate cut in August and at least two cuts this year. Policymakers have remained quiet as the July 4 election approaches, so there have been few clues about the future of monetary policy in the UK.

However, seven policymakers voted to maintain rates at the last meeting, while two were ready to cut. This time, analysts believe the vote distribution will either remain the same or there will be eight for a hold and one for a cut.

Meanwhile, policymakers have forecasted just one rate cut in the US this year. However, economic data has pointed to the possibility of two cuts, which have kept up expectations. The likelihood of a cut in September is at 67% because inflation has eased, and the economy is slowing down. Investors will focus on unemployment claims today and PMI data on Friday to see whether the downtrend continues.

GBP/USD key events today

• Monetary policy summary
• MPC official bank rate votes
• BoE’s official bank rate
• US unemployment claims

GBP/USD technical forecast: Bears return as 30-SMA holds firm

On the technical side, the GBP/USD price is dropping after failing to go beyond the 30-SMA and the 0.382 Fib level. This is a sign that bears are still in the lead. As a result, the RSI has fallen back below 50 into bearish territory.

With this decline, bears have met the 1.2700 key support level. Given the bearish bias, GBP/USD might soon break below to target the 1.2600 level. However, if the level holds firm, bulls might make another attempt at the 30-SMA resistance.

https://www.forexcrunch.com/blog/2024/06/20/gbp-usd-forecast-pound-slips-as-markets-brace-for-boe/