• Fed policymakers are ready to start lowering borrowing costs.

• Investors increased the likelihood of a super-sized 50 bps Fed rate cut.

• The UK central bank will not rush to cut rates.

The GBP/USD forecast is bullish as the pound hovers near a two-and-a-half-year high against the dollar after the Jackson Hole Symposium. Notably, Powell said it was time for the Fed to start cutting rates. On the other hand, BoE’s Bailey said it was too early to declare victory against inflation.

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The dollar plunged on Friday after Powell signaled a rate cut in September. The Fed has to balance between inflation and growth. Therefore, since inflation is on a consistent downtrend and growth is slowing down, policymakers are ready to start lowering borrowing costs. Notably, the Fed is keen on the labor market which has started cracking. Powell noted it was time for the central bank to adjust policy.

Investors increased the likelihood of a super-sized 50 bps rate cut while that of a smaller cut fell to 65%. If data before the September meeting meets expectations, the Fed will likely cut by 25 bps. On the other hand, if data misses forecasts, the likelihood of a 50 bps cut will increase.

Meanwhile, the Bank of England Governor Bailey had a different tone. He said the UK central bank would not rush to cut rates because it was too early to declare victory on inflation. Consequently, sterling rallied. At the same time, UK data has revealed a better-than-expected recovery in the economy. On Friday, business confidence was near a three-year high, further supporting the pound.

GBP/USD key events today

There won’t be any key economic releases today from the US or the UK. Consequently, the pair might consolidate.

GBP/USD technical forecast: Bulls reach new highs despite stalled momentum

On the technical side, the GBP/USD price has made a new high above the 1.3150 resistance level. It trades far above the 30-SMA and the RSI remains in the overbought region. However, the RSI has failed to make higher highs, showing bullish momentum has stalled despite higher prices.

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If this continues, the price will likely reach the next hurdle at the 1.3301 level. At the same time, bears might gain momentum and trigger a pullback to the 1.3150 level or the 30-SMA before the bullish trend continues.

https://www.forexcrunch.com/blog/2024/08/26/gbp-usd-forecast-tests-2-5-yr-top-after-powell-remarks/