GBP/USD recovers ahead of key central bank decisions
GBP/USD approaches 1.2700 amid central bank policy decisions
GBP/USD rebounded on Monday, rising toward the 1.2700 mark after snapping a three-day losing streak that had pushed the pair near the 1.2600 handle. Traders are bracing for a crucial week as both the US Federal Reserve (Fed) and the Bank of England (BoE) prepare for major monetary policy announcements.
The Fed is widely expected to implement a 25 basis point rate cut, with the CME’s FedWatch Tool pricing in a 99.1% probability. Traders are focused on the Fed's updated Summary of Economic Projections (SEP) for 2025, which could influence the US Dollar’s (USD) performance.
GBP/USD chart ( April 2024 - December 2024) Source: Trading View
U.K. economic indicators in focus
The UK economic calendar is equally critical, with the release of Average Earnings and labor market data expected on Tuesday. Analysts predict an increase in quarterly Average Earnings to 5% YoY, which could support the British Pound (GBP).
The BoE's interest rate decision on Thursday is expected to see policymakers holding the current rates steady, likely in an eight-to-one vote split. However, at least one dovish BoE member is anticipated to advocate for a rate cut, adding uncertainty to the outlook.
Technically, GBP/USD remains capped below its 50-day and 200-day EMAs at 1.2802 and 1.2820, respectively. A small-bodied green candlestick on the daily chart signals a limited recovery, with key resistance at 1.2691 aligned with the descending channel’s upper boundary.
If the pair decisively breaks above 1.2691, a rally toward 1.2811 could follow. On the downside, support is seen near the recent low of 1.2487. A breach of this level could drive the pair toward its yearly low of 1.2299.
Previously, we discussed GBP/USD's resilience supported by robust UK PMI data and cautious US inflation expectations.
