Daily Analysis GBPUSD - 25 July 2023

The recent selloff of the USD, caused by a miss in the US CPI report, has been completely reversed due to better-than-expected US economic data. These positive surprises have kept the possibility of a rate hike after the July increase alive. Last week, the US Initial Claims beat expectations and reached record lows, while the US PMIs showed a mixed picture, although the Manufacturing PMI exceeded expectations significantly. The market expects the Fed to raise rates by 25 bps this week and maintain a data-dependent approach. Therefore, if the US continues to receive positive economic data, another rate hike is highly likely.

On the other hand, the UK CPI missed expectations across the board last week, leading to a significant revision in interest rate expectations. Prior to the report, the market had been pricing in a higher chance of a 50-bps hike due to the higher wages data from the previous UK employment report. Now, the market believes there is a higher likelihood that the Bank of England (BoE) will raise rates by 25 bps at the upcoming meeting, and this adjustment has put downward pressure on the GBP.

The GBP/USD has found support at the 1.2800 level, which is now acting as a new support after previously serving as a resistance level. This development is a positive sign for the continuation of the bullish long trend. If the price manages to break out above this level, it is likely to move towards the 1.2700 mark.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
1.3310	1.3200	1.3000	1.2850	1.2750	1.2650