Bullish view
- Buy the GBP/USD pair and set a take-profit at 1.3600.
- Add a stop-loss at 1.3400.
- Timeline: 1-2 days.
Bearish view
- Sell the GBP/USD pair and set a take-profit at 1.3400.
- Add a stop-loss at 1.3600.
The GBP/USD exchange rate rose slightly after the US published weak jobs numbers, confirming the view that the Federal Reserve will cut interest rates in the coming meeting. It rose to 1.3500, up from this month’s low of 1.3335.
US Inflation Data and Fed Rate Cut Hopes
The GBP/USD exchange rate held steady after the US released the latest non-farm payrolls (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy created just 22,000 jobs last month as the unemployment rate rose to 4.3%, the highest level since the pandemic.
These numbers confirmed that companies were no longer hiring as they adjusted to the new normal of higher tariffs in the US. Donald Trump has implemented a minimum tariff of 10% on all imported goods, with some countries like India and Brazil paying a 50% tariff.
Therefore, economic numbers coming later this week will likely confirm that the US economy is in a stagflation a period characterized by high inflation and slow economic growth.
Economists polled by Reuters expect the data to show that the headline consumer price index (CPI) continued its slow uptrend, as companies adjusted their prices to Donald Trump’s reciprocal tariffs on all countries.
Core inflation, which excludes the volatile food and energy prices, is expected to rise to 3.3%, moving further away from the Federal Reserve’s target of 2.0%.
These numbers, especially on the labor market, are expected to push the Federal Reserve to cut interest rates in the coming meeting on Wednesday next week. Economists see the bank cutting by 0.25%, which will be the first time this year.
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The Bank of England (BoE), on the other hand, is expected to leave interest rates unchanged because of the soaring inflation.
GBP/USD Technical Analysis
The daily chart shows that the GBP/USD pair has rebounded from a low of 1.3143 in August to 1.3500 today. It has moved above the important resistance level at 1.3428, its highest point in September last year.
The pair has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. It has also formed an inverse head-and-shoulders pattern.
Therefore, the most likely scenario is where the pair continues rising as bulls target the psychological point at 1.3600. A drop below the support at 1.3430 will invalidate the bullish outlook.
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