GBP/USD Weekly Forecast: Fed, UK CPI To Put A Lid On Gains Below 1.39

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• The GBP/USD pair managed to gain despite a broadly weaker trend.
• The pair maintains a ranging price behavior.
• The BOE is cautious amid slow economic recovery and the pandemic.
• The Fed’s next meeting is a risk event that can weigh on the pair.

The GBP/USD weekly forecast is mildly bullish, as Friday saw a decent gain amid the dollar sell-off. However, the price is still in a broad range. Despite the pound’s decline for the week, the close of 1.3861 did not indicate that the pound had deviated any more from the previous ranges of the past six weeks, or more widely, the last six months.

The GBP/USD pair traded between 1.3750 and 1.4000 as of the second week of June, during which there was a brief four-day drop to 1.3600. During February, the range ascended to 1.4000, but the range below is nearly identical at 1.3700. The most active periods were in the range of 1.3800 to 1.4000, except the five weeks from May 10 to June 15.

Due to the resurgence of the coronavirus and the long delay in the economic recovery, the UK has experienced a long period of relative stagnation. While the UK has progressed in rebuilding its economy, gains are still held hostage until the pandemic is no longer a public health concern.

Since it is still uncertain whether the pandemic is a threat to the economy, the Bank of England (BOE) maintains its cautious monetary policy. This caution may continue during the winter season. The consumer price index is going up, but profit margins are still much safer than in the United States.

During its meeting on Sept. 21-22, the Federal Reserve Board may be compelled to address the issue of global inflation and its profound political implications. This, along with the Jackson Hole symposium on Aug. 26-28, are the main threats to the pound’s weakening against the dollar.

The UK economy and the British pound fared well this week. The Gross Domestic Product (GDP) for June and Q2 came in better than expected. In addition, industrial production in June exceeded forecasts for the third consecutive month.

United States' Key Events During the Week of Aug. 16-20

Next week, there will be some great macro events. Retail sales in the US are set to decline by 0.2% month-over-month on Tuesday. In addition, the minutes of the Federal Reserve's most recent meeting will be released on Wednesday.

UK’s Key Events During the Week of Aug. 16-20

The key event for the British pound next week is CPI data, followed by the PPI figures. We expect a mild decline of CPI to 2.3% year-over-year. However, if the CPI figures came higher than 2.3%, the pound would seek strong support against the US dollar and other peers.

GBP/USD Weekly Forecast – Daily Chart

GBP/USD Weekly Technical Forecast: Sandwiched Between 100 and 200 DMAs

The GBP/USD pair recovered lost ground on Friday, and closed the week in neutral territory. The price found support near the 200-day SMA and managed to close above the 20-day SMA.

However, the price is now near the 100-day SMA, which may continue to provide resistance to the pair. Although the volume is positive for the pair, the price has to overcome the 10-day and 50-day SMAs to continue the bullish momentum.