Tuesday’s GBP/USD outlook is bullish as the dollar weakened amid a drop in US interest rate expectations and Treasury yields. This shift was in response to a subtle dovish change in the tone of Federal Reserve officials. Notably, two Fed officials acknowledged that the recent bond sell-off might remove the need for further interest rate hikes.

Meanwhile, the pound remained close to last week’s 1-1/2 week high, as recent economic data provided some cause for optimism regarding the UK’s economic prospects. As such, some analysts pointed out that last week’s UK economic figures offered hope.

The S&P Global UK Services Purchasing Managers’ Index reached an 8-month low. However, it exceeded the preliminary “flash” reading of 47.2. Additionally, investors have low expectations of another Bank of England (BoE) rate hike at the upcoming policy meeting in November. However, they are factoring in one more rate increase in 2024.

Money markets currently assign a 25% probability of a BoE rate move in November. Furthermore, the likelihood increased to 40% in December and 50% in February.

According to Sanjay Raja from Deutsche Bank, the Bank of England Credit Conditions Survey on Thursday will be vital for assessing the strength of household consumption and business investment in the near future. Raja anticipates subdued figures but suggests that households and businesses have been depleting their savings instead of relying on borrowing.

GBP/USD key events today

There will be two major reports from the US, including:

• The producer price index.
• The FOMC policy meeting minutes.

GBP/USD technical outlook: Bulls testing 1.2250 resistance once again.

(Click on image to enlarge)

GBP/USD 4-hour chart

On the charts, the GBP/USD pair has risen to retest the 1.2250 resistance level. The bias on the 4-hour chart is bullish as the price sits above the 30-SMA while the RSI trades nearer the overbought region. Bulls recently took over after the bearish trend failed to continue below the 1.2100 support level. 

A break above 1.2250 would further confirm the new bullish bias. Moreover, it would clear the path for bulls to retest the 1.2400 resistance level. Furthermore, the bullish bias will hold if the price respects the 30-SMA as support and the RSI stays above the 50-mark.

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