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• GBP/USD drops after Fed’s 9–2 decision to hold rates; Powell gives no guidance for September.
• US Initial Jobless Claims fall to 218K ahead of NFP; strong labor market supports USD.
• Core PCE rises to 2.8% YoY in June; headline PCE hits 2.6%, both above estimates.

The GBP/USD posted moderate losses during the North American session on Thursday after the Federal Reserve (Fed) held rates on Wednesday and failed to provide forward guidance for the September meeting. This, along with solid US jobs data and an uptick in inflation, boosted the Dollar. The pair trades at 1.3214 after reaching a high of 1.3281.

Sterling weakens to 1.3214 after Fed holds steady, PCE inflation ticks up, and solid labor data tempers rate cut bets
 

On Wednesday, Powell and Co. decided to keep policy as it is on a 9-2 split decision, with Governors Bowman and Waller opting for a 25-bps rate cut. Powell pushed back against Trump’s comments that they might ease policy in September and said that they would adopt a meeting-by-meeting approach.

A flurry of economic data from the United States (US) inundated the markets. Initial Jobless Claims for the week ending July 26 dipped to 218K, better than the expected 224K ahead of the release of the July Nonfarm Payrolls report on Friday, with economists expecting that the economy would add 110K new jobs.

At the same time, the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, rose to 2.8% YoY in June, up from May’s estimate of 2.7%. Headline PCE jumped from 2.3% to 2.6% YoY, above forecasts of 2.5%.

Policy divergence favors further downside in GBP/USD
 

The data had eased the chances that the Fed would cut rates at the September meeting to a hold. Odds for keeping rates unchanged are at 65%, while for a cut at 35%. In the UK, investors had priced in an 80% chance that the Bank of England would cut rates at the August 7 meeting to 4%.

Therefore, divergence between the two central banks suggests that the GBP/USD could be tilted to the downside.

GBP/USD Price Forecast: Technical outlook
 

The GBP/USD dropped below the 100-day SMA of 1.3334, which sponsored a break of 1.3300 as the pair nosedived. The Relative Strength Index (RSI) turned bearish, an indication that sellers might continue to push the pair lower.

If GBP/USD clears 1.3200, the next support would be 1.3100, ahead of the 200-day SMA at 1.2977. On the flip side, if buyers achieve a daily close above 1.3250, a test of 1.3300 could be on the cards.
 

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