GBP/USD Forecast: Bulls retain control near multi-month top, US Retail Sales awaited

• GBP/USD gains traction for the fourth straight day and touches a fresh ten-month peak.
• Expectations for an imminent Fed rate hike pause weigh on the USD and lend support.
• The technical setup supports prospects for additional gains ahead of the US Retail Sales.

The GBP/USD pair scales higher for the fourth successive day on Friday and climbs closer to mid-1.2500s, hitting its highest level since June 2022 during the Asian session. The ongoing positive momentum is sponsored by sustained selling around the US Dollar (USD), which continues to be weighed down by expectations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle. The bets were lifted by data released on Thursday, which showed that US inflation at the wholesale level continued its downward slide 
and cooled dramatically in March.

In fact, the US Bureau of Labor Statistics reported that the US Producer Price Index (PPI) decelerated sharply from the previous month's upwardly revised reading of 4.9% to a 2.7% YoY rate in March - the lowest level since January 2021. On a monthly basis, the key inflation gauge slumped by 0.5%, while Core PPI, which excludes the more volatile food and energy prices, fell by 0.1% during the reported month and came in at 3.4% for the 12 months that ended in March. This comes on the back of the softer US CPI report on Wednesday and indicates that disinflation is progressing smoothly.

Other data released on Thursday showed that the number of Americans filing new claims for unemployment benefits rose more-than-expected last week, to the highest level since January 15, 2022. This was seen as a sign that labor market conditions were loosening up as higher borrowing costs continue to dampen demand in the economy. The markets were quick to react and now expect that the Fed will be done with its monetary tightening after hiking one last time next month. This, in turn, drags the USD to a nearly one-year low and acts as a tailwind for the GBP/USD pair.

Bullish traders, meanwhile, seem rather unaffected by softer US macro releases, showing that economic growth remained flat in February. The Bank of England (BoE) Chief Economist Huw Pill, however, noted that the current data profile is much better than the Monetary Policy Committee’s forecasts from the second half of last year. That said, the recent mixed signals from BoE policymakers over future rate hikes warrant some caution before placing aggressive bullish bets around the GBP/USD pair as traders now look to the US Retail Sales data for a fresh impetus.

Technical Outlook

From a technical perspective, the overnight sustained strength and close above the 1.2500 psychological mark could be seen as a fresh trigger for bullish traders. Furthermore, oscillators on the daily chart are holding comfortably in the positive territory and are yet to flash overbought conditions. This, in turn, supports prospects for a further appreciating move toward reclaiming the 1.2600 round figure en route to May 2022 swing high, around the 1.2665 region.

On the flip side, the 1.2500 mark now seems to protect the immediate downside. Any subsequent slide is more likely to attract fresh buying and remain limited near the 1.2450-1.2440 strong horizontal resistance breakpoint, now turned support. That said, some follow-through selling could make the GBP/USD pair vulnerable to weaken further below the 1.2400 round figure and test the next relevant support near the 1.2375-1.2370 region.