• The GBP/USD forecast indicates an increasing likelihood of a Fed rate cut in September.

• Traders are only pricing a 40% chance of another Bank of England rate cut this year. 

• Wholesale inflation in the UK hit a two-year high of 1.9%.

The GBP/USD forecast indicates an increasing likelihood of a Fed rate cut in September, which is weighing on the dollar. Meanwhile, the pound remained steady as bets for another Bank of England rate cut this year have decreased following upbeat UK wholesale inflation. 

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Rate cut bets increased after Fed’s John Williams said a rate cut was possible. However, he noted that the outlook would largely depend on the upcoming economic releases. His remarks pushed traders to price an 89% chance of the central bank cutting in September.

The story is different in the UK, where traders are only pricing a 40% chance of another Bank of England rate cut this year. Data revealed that wholesale inflation in the UK hit a two-year high of 1.9%. This came after consumer inflation also jumped. As a result, policymakers have assumed a more cautious tone about future rate cuts.

“A more persistent hold on Bank Rate is appropriate right now, to maintain the tight-but-not-tighter monetary policy stance needed to lean against inflation persistence,” Bank of England Monetary Policy Committee member Catherine Mann said in remarks released by the BoE on Tuesday.

GBP/USD key events today

• US preliminary GDP q/q
• US unemployment claims

GBP/USD technical forecast: Bulls eye the 1.3575 resistance

On the technical side, the GBP/USD price trades above the 30-SMA with the RSI in bullish territory above 50. This indicates that bulls are currently in the lead. However, the price is still not making higher highs and lows. 

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The trend recently shifted from bullish to bearish after meeting the key resistance level at 1.3575. However, bears were unable to break below a solid support zone comprising the 0.382 Fibonacci level and the 1.3401 level. Here, the price made a solid bullish candle that broke above the SMA. It showed a surge in momentum. Although bulls struggled to maintain the price above the SMA, they produced another strong candle, indicating solid bullish momentum. 

The price is now targeting the 1.3575 resistance level. A break above will make a higher high, continuing the previous uptrend. It will also solidify the bullish trend.

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