The GBP/USD weekly forecast shows more upside potential as easing US inflation increases Fed rate cut expectations, weighing on the dollar.

Ups and downs of GBP/USD

The GBP/USD pair ended the week very bullish as economic data from the US weakened the dollar. At the same time, data from the UK strengthened the pound. The US Consumer Price Index was the major catalyst during the week, showing a decline in inflation. Consequently, investors gained confidence that the Fed would cut rates in September.

Meanwhile, employment data from the UK showed a significant drop in jobless claims, indicating a tight labor market that could keep the BoE from cutting rates too soon.

Next week’s key events for GBP/USD

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Next week, the UK will release its crucial inflation report. At the same time, investors will focus on retail sales and the manufacturing PMI. Meanwhile, the US will release the FOMC meeting minutes and data on durable goods orders. 

The UK inflation report will significantly shape the outlook for Bank of England rate cuts. Currently, markets are pricing in a 55% chance that the BoE will cut rates in June. On Tuesday, BoE chief economist Huw Pill said that the central bank might be ready to cut rates in the summer. However, the labor market remains tight. If inflation remains high, this outlook might change significantly.

Meanwhile, the FOMC minutes will reveal what led policymakers to the last decision to hold rates. It might also give clues on what the Fed will do next.

GBP/USD weekly technical forecast: Bulls aiming for 1.2802 resistance.

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GBP/USD daily chart

On the technical side, the bias for GBP/USD has gone from bearish to bullish. At the same time, the price is back within the 1.2551–1.2802 range area. The previous bearish trend paused and was reversed at the 1.2300 level. Here, the price made a morning star candlestick pattern, leading to a break above the 22-SMA and the 1.2551 key level.

Furthermore, when the price broke above the SMA, it pulled back to retest it as support before making a new high. This confirmed that bulls were ready to take charge. Currently, the path is clear for the pound to retest the 1.2802 resistance level. A break above this level would further strengthen the bullish bias.

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