GBP/USD Rebounds as BoE Hike Odds Rise and Fed Bets Fade
The British pound has gained momentum in recent days after a series of economic data releases and market sentiment shifts. On Tuesday, the GBP/USD pair hit its lowest level since June at 1.32055, but rebounded to 1.3270 in Wednesday's European session following revised figures from the Office for National Statistics that showed UK second-quarter GDP growth at 0.5%, up from an initial estimate of 0.4%. This placed the UK's first-half growth rate at the top of the G7.
The upward revision to UK growth, combined with a decline in US inflation expectations after the personal consumption expenditures report showed core inflation at 3.0% against a forecasted 3.3%, has shifted market sentiment toward a potential Bank of England interest rate hike in November. The probability of such an event now stands at 80-85%, according to money markets, while Fed hike odds have decreased to less than half that level.
The pair's price action over the past two weeks illustrates this shift, with GBP/USD trading firmly before the Fed decision on September 16 and then experiencing a significant decline in its aftermath. The current support levels for the pair sit at 1.32055, Tuesday's low, followed by 1.3164, while resistance is found at 1.3300, then 1.3344, and finally 1.3400.