GBP/USD Forecast Highlights

• In response to strong inflation and dismissive replies from central banks, the GBP/USD rolled on.
• COVID-19 headlines, the reopening of the UK, and the US infrastructure negotiations stand out as key events.
• The daily chart for the next week paints a mixed picture.

On Friday, July 16, the GBP/USD forecast saw a downturn throughout the day as the pair reached below the 1.37-mark. The pair finished the day at the 1.3764 level.

GBP/USD Fundamental Forecast

Despite a difficult week for the GBP/USD, the pound is still supported by predictions of a more hawkish Bank of England attitude. The build-up to the August MPC meeting is gaining traction as markets boost their odds that the BOE will begin modifying its monetary policy to better adjust to current economic conditions.

In the UK, daily coronavirus infections, hospitalizations, and deaths may have a greater impact on health than previously thought. If healthcare services are put under strain, the Prime Minister may do another U-turn. But, on the other hand, if vaccination rates are high enough to turn the tide, the sterling might shine.

Inflation in the United States is undeniably rising – the headline Consumer Price Index increased by 5.4% year-over-year in June, while Core CPI increased by 4.5%, both above expectations.

In the last week Fed meeting, Jerome Powell said that while inflation is expected to continue to be high for several months, it is temporary and will subside. Furthermore, he stated that the economy is still “a ways off” from making “substantial further progress” — the Fed’s euphemism for assessing whether to cut its bond-buying strategy. Given that the Fed is still printing $120 billion each month, the dollar has lost ground.

What’s Next to Watch in GBP/USD?

Looking ahead to next week’s UK calendar, we’ll get another BOE member, Haskel, speaking on Monday, and then see little else until the June retail sales and PMIs are released on Friday.

For the US economic calendar, we have an initial jobless claims report on Thursday.

GBP/USD Technical Analysis: Key Levels in Action

GBP/USD remained in a range above 1.3730 last week, and the initial bias remains neutral for the upcoming week. On the downside, a breach of 1.3730 will restart the fall from 1.4248. A break of 1.4000 will shift the bias back to the upside for a retest of the 1.4240 to 1.4280 resistance zone.

GBP/USD Daily Chart Forecast