• Traders were rushing for safety amid fears of a recession in the US.

• Data on Friday revealed a sharp slowdown in US job growth in July.

• The pound remained fragile after the Bank of England cut interest rates last week.

The GBP/USD outlook favors the bears, with the pound hovering near a one-month low amid poor market risk appetite. Investors are dumping risky assets amid a wave of global economic uncertainty.

On Monday, traders were rushing for safety amid fears of a recession in the US. Furthermore, there were worries about China’s economy, which has performed dismally. Notably, data on Friday revealed a sharp slowdown in US job growth in July. The economy added a smaller-than-expected 114,000 jobs while the unemployment rate rose to 4.3%.

The figures led to a surge in Fed rate cut bets, with investors now expecting a 50-bps cut in September. Furthermore, recent data from the US has revealed cooler-than-expected inflation. Therefore, if inflation is falling and the economy deteriorating, the Fed might fail to achieve a soft landing. Moreover, there is now more pressure on the central bank to lower borrowing costs.

This trend of weak economic performance is spreading across major economies. The period of high inflation is coming to an end. Policymakers are now grappling with the effects of prolonged high interest rates. As a result, there is increased economic uncertainty, which is hurting the appetite for risk.

Additionally, the pound remained fragile after the Bank of England cut interest rates last week. This was the central bank’s first rate cut in four years. Moreover, investors expect one more cut before the year ends.

GBP/USD key events today

• US ISM Services PMI

GBP/USD technical outlook: RSI indicating a corrective bearish move

On the technical side, the GBP/USD price has fallen after retesting the 30-SMA resistance. The downtrend remains intact because the price has stayed below the 30-SMA. At the same time, the RSI has traded below 50 in bearish territory.

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However, while the price has made consistent lower lows, the RSI has traded sideways. Therefore, bearish momentum has plateaued, indicating a corrective move. If there is no surge in momentum, bulls might take control with a break above the 30-SMA. However, if bears remain in control, the price will break below the 1.2700 level to make new lows.

https://www.forexcrunch.com/blog/2024/08/05/gbp-usd-outlook-struggling-under-1-28-amid-risk-off-tone/