GBP/USD rebounds to test THIS key resistance
The pound has been among the strongest currencies in the G10 space so far this week, owing to strength in UK data and diminishing hopes that the Bank of England will deliver a rate cut at this week’s policy meeting. However, against the US dollar, it is likely to resume lower given how strong the greenback has been as expectations about a hawkish rate cut from the FOMC builds. Meanwhile, a bit of selling in the stock market is also boosting the appeal of the US dollar, and this could provide pressure on the GBP/USD as it tests THIS key resistance area around 1.2715 to 1.2720 – a prior support area and where we have the 61.8% confluence.
This morning’s release of UK wages data surprised to the upside, and with it killed any hopes for a BoE rate cut this week. The Average Earnings Index rose to 5.2% on a 3m/y basis, beating the 4.6% reading expected. Strong wage growth and sticky inflation in the services sector are factors discouraging the BoE to cut rates further.
The latest UK wages data come hot on the heels of global PMI figures released yesterday. The key theme was faster-than-expected manufacturing contraction but stronger services expansion. The standout was the US services PMI, hitting a 38-month high of 58.5, driven by firm optimism about output under a new Trump administration. Coming just ahead of the year’s final FOMC meeting, it highlights the US economy’s resilience and potential for strength—factors that could fuel inflation and a less dovish Fed.
Today’s US retail sales data was mixed, and in any case unlikely to influence the Fed’s decision tomorrow.
By Fawad Razaqzada, market analyst with FOREX.com
