• Data showed that the UK economy expanded by 0.6% in Q2.

• Markets are now pricing in a 25 bps Fed September rate cut as more likely.

• Investors are awaiting the US retail sales report.

The GBP/USD outlook is bullish after data revealed that the UK economy expanded in line with economists’ expectations. At the same time, investors are more confident the Fed will cut interest rates in September after US inflation eased slightly from the previous month.

The pound rose on Thursday after data showed that the UK economy expanded by 0.6% in the second quarter. Britain’s economy has struggled to recover since the COVID-19 pandemic but has remained steady.

In the previous session, the pound fell as data revealed cooler-than-expected consumer inflation figures. Moreover, service inflation eased, raising the chances of a Bank of England rate cut in September.

Meanwhile, the Fed will likely cut rates in September. However, markets are now pricing in a 25 bps rate cut as more likely. Inflation figures on Wednesday showed further easing, with the annual figure dropping below 3% for the first time. Meanwhile, the monthly figure increased by 0.2% but aligned with expectations.

After the report, the chances of a 25 bps rate cut in September increased to 64%. Initially, panic after the US jobs report had increased expectations for a 50 bps rate cut. However, that changed as recession fears declined. Currently, the chance of such a cut is at 36%.

Inflation in the US has behaved well since the second quarter. The decline has been consistent, giving policymakers confidence. Investors will now watch the retail sales report for more clues on the state of the economy.

GBP/USD key events today

• US core retail sales m/m
• US retail sales m/m
• US unemployment claims

GBP/USD technical outlook: Bulls set their sights on the 1.2900 resistance

On the technical side, the GBP/USD price is looking up after a brief pullback. The bullish bias is strong as the 30-SMA points up and the RSI trades near the overbought region. Therefore, there is a high chance the price will make a higher high.

The next strong barrier is at the 1.2900 psychological resistance. If the price reaches this level, it will have retraced over 61.8% of the previous swing. A break above this retracement level will strengthen the bullish bias. However, GBP/USD might pause here before breaking above.

https://www.forexcrunch.com/blog/2024/08/15/gbp-usd-outlook-pound-climbs-as-uk-gdp-meets-forecast/