GBPUSD Headed Up As Powell Comments Weigh Down the Dollar

Summary:
• GBPUSD stayed up on Tuesday after Fed Chairman Jerome Powell stated that US inflation is on a downward trajectory, but much more is at play.

GBPUSD rose for the third session on Wednesday, gaining 0.1 percent to hit an intraday high of 1.2697 at the time of writing. The dollar was weakened by Fed Chairman Jerome Powell’s comments on US inflation. On the other hand, the pound was boosted by better-than-expected UK Purchasing Managers Index (PMI) figures released on Tuesday.

Fed Chairman Jerome Powell stated on Tuesday that the US economy was on the disinflationary path, with traders picking cues of possible interest rate cuts starting September.  However, Powell added that the Fed would need more data to prove that the inflation rate was sustainably on the downward trajectory.  

The UK will hold its general elections on July 4, but the sentiment around it has not weighed on the pound.  Instead, the GBPUSD pair is likely to be propelled up by the PMI figures which signal recovery by the UK economy. The S&P Global/CIPS UK Services PMI figure came in at 52.1 in June, exceeding the forecast 51.2.  Similarly, the composite PMI registered better-than-expected results, coming in at 52.3 versus the forecast 51.7.

Looking ahead, traders will be focusing on the ADP Employment figures and Initial Jobless Claims figures to get more cues on the GBPUSD pair.  Also, the US will have its S&P Global Services PMI out on Wednesday. However, the highlight of the day will be the FOMC Meeting Minutes, which will provide a better perspective of the Fed’s likelihood of interest rate cuts, and inject fresh volatility into GBPUSD.

Technical analysis

The momentum on the GBPUSD pair is currently in favour of control by the buyers, with the pivot at 1.2655. The first resistance will likely come at 1.2680, but extended control by the buyers will break the resistance and build the momentum to potentially move the pair further up to test 1.2700. On the other hand, the sellers will likely take control if the pair moves below 1.2655. In that case, the first support will likely come at 1.2640. However, extended control by the sellers will break the support and move the pair lower to test 1.2625.