• US services sector PMI data showed expansion.

• US jobless claims fell, indicating a still-tight labor market.

• The pound fell as markets contemplated the Bank of England’s first rate cut.

The GBP/USD weekly forecast is slightly bearish despite the recent rally, as the Bank of England appears more confident about cutting rates further.

Ups and downs of GBP/USD

The pound had a bearish week but closed far above its lows. The pair started the week down as investors dumped risky assets amid fears of a US recession. Data in the previous week showed weaker-than-expected economic performance.

However, this changed with the US services sector PMI data, which showed expansion. Meanwhile, jobless claims fell, indicating a still-tight labor market. Nevertheless, investors were already pricing a more significant 50 bps Fed rate cut in September.

Additionally, the pound fell as markets contemplated the Bank of England’s first rate cut.

Next week’s key events for GBP/USD

Next week, the pound might experience significant volatility due to US and UK inflation and retail sales data. Additionally, the UK will release data on employment, GDP, and manufacturing production. Markets will focus on the consumer inflation reports, shaping the outlook for monetary policy in the UK and the US.

The Fed is looking to start its rate-cutting cycle in September. Inflation in the US has been on a downtrend, and the economy is beginning to crack. Therefore, further easing inflation will give policymakers enough confidence to cut interest rates.

Meanwhile, the Bank of England recently implemented its first rate cut. However, most policymakers believe underlying inflation remains high. Still, they have gained enough confidence to start lowering borrowing costs.

GBP/USD weekly technical forecast: Bears eying 1.2620 support

On the technical side, the GBP/USD price trades below the 22-SMA with the RSI below 50. Therefore, bears are in control. However, the price has made higher highs and lows on a larger scale, indicating a bullish trend.

After puncturing the 1.2800 support, bears are now eyeing the 1.2620 level. Initially, GBP/USD reached a higher low at this level. Therefore, it is a strong barrier. However, if bears breach this level, the price will make a lower low, breaking the bullish trend pattern. In this case, GBP/USD would confirm a new bearish trend. On the other hand, if the level holds firm as support, bulls might resurface to make a new high.

https://www.forexcrunch.com/blog/2024/08/10/gbp-usd-weekly-forecast-boe-confident-to-cut-rates-further/