The GBP/USD price analysis is leaning slightly bullish as the pound shows signs of recovery ahead of the Fed and Bank of England policy meetings. The Fed will probably hold current rates, while the BoE is more likely to cut them.

The pound recovered on Tuesday after plunging in the previous session due to an increase in BoE rate cut bets. By Friday, markets were pricing at a 50% chance that the BoE would cut in August. However, this figure rose to 60% on Monday, weighing on the pound. 

Traders depend on speculation and the outlook for Fed policy. Due to the July 4th election, policymakers in the UK have remained silent for nearly two months. As a result, there has been little guidance on where rates might be in August.

Inflation in the country has reached the 2% target. However, service inflation has remained stubbornly high, keeping policymakers cautious. Still, with inflation in the US easing, there is hope for a dovish Fed tilt that will allow other major central banks to follow suit. 

Meanwhile, the Fed policy meeting will significantly impact September rate cut expectations. In recent speeches, Powell has acknowledged progress on inflation. He said confidence is growing that inflation will fall to the 2% target. Additionally, Powell has noted the recent softer labor market figures, which could increase the urgency of lowering interest rates. Therefore, market participants are hoping for a signal that the Fed will start cutting rates in September. 

GBP/USD key events today

• US CB Consumer Confidence
• US JOLTS Job Openings

GBP/USD technical price analysis: Weak bearish momentum signals a corrective move

(Click on image to enlarge)

GBP/USD 4-hour chart

On the technical side, the GBP/USD price is trading in a tight, bearish channel with clear support and resistance lines. The decline started when the price failed to sustain a move above the 1.3001 resistance level. However, bears have been unable to make significant swings below the 30-SMA, indicating weak momentum. 

This weak momentum can also be seen in the RSI, which has failed to reach the oversold region. Therefore, this might be a corrective move. Bulls might take control with a break above the 30-SMA. Otherwise, the slow downtrend will continue below the 1.2800 support level.

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