GBP/USD forecast: forex signal ahead of the Fed rates decision

July 24, 2023 07:30 AM PDT | By Invezz

GBP/USD forecast: forex signal ahead of the Fed rates decision — Image source: Invezz

UK PMI retreated in July

The economic outlook of the UK continued to worsen in July. Flash manufacturing and services PMIs dropped once again as interest rates rose. According to S&P, manufacturing PMI dropped from 46.5 in June to 45 in July. This decline was worse than the median estimate of 46.1.

The services PMI figure dropped from 53.7 in June to 51.5 in July. Again, this decline was worse than the estimated 53.0. As a result, the composite PMI that includes the services and manufacturing data declined from 52.8 to 50.7. This means that the figure is approaching the contraction zone of 49.

The UK is not the only country where manufacturing and services sectors worsened in July. In the Eurozone, the services PMI figure dropped from 52.0 in June to 51.1 in July while the manufacturing figure fell to 42.7.

The next key important catalyst for the GBP/USD pair will be the upcoming Federal Reserve interest rate decision set for Wednesday. As I wrote here, analysts believe that the Fed will continue hiking rates.

If this happens, the Fed will hike by 0.25% and push rates to the highest level since 2001. However, this will likely be the last rate hike of the year.

The GBP to USD exchange rate will also react to the next Bank of England (BoE) interest rate decision scheduled for August 3rd. Like the Fed, analysts expect that the bank will hike rates by 0.25%.

GBP/USD technical analysis

GBP/USD chart by TradingView

The GBP/USD pair has been in a strong bearish downward trend in the past few days. This decline started when the pair retested the important resistance point at 1.3141 on July 14th. This was a notable level since it was along the upper side of the ascending channel shown in black.

The Relative Strength Index (RSI) has moved to the neutral point. It is also being supported by the 25-day and 50-day moving averages. Therefore, the pair will likely retest the lower side of the channel and then retest its YTD high of 1.3141.

The post GBP/USD forecast: forex signal ahead of the Fed rates decision appeared first on Invezz

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