GBP/USD Weekly Forecast: Pound Sterling rebounds, not out of the woods yet
Premium|Take advantage of 60% OFF on your first month.
Grab this special offer, it's 7 months for FREE deal! And access ALL our articles and analysis.
You have reached your limit of 5 free articles for this month.
BLACK FRIDAY SALE! 60% OFF!
Grab this special offer, it's 7 months for FREE deal! And access ALL our articles and analysis.
CLAIM OFFER- The Pound Sterling rebounded firmly against the US Dollar, snapping the losing streak.
- For further direction, GBP/USD looks to central bank chiefs Bailey and Powell, as well as US Nonfarm Payrolls data.
- Dual Bear Crosses and a bearish RSI could continue threatening the Pound Sterling recovery.
The Pound Sterling (GBP) snapped a two-week downtrend and staged a comeback against the US Dollar (USD), driving the GBP/USD pair back to the 1.2700 threshold.
Pound Sterling came up for air as USD buyers took a breather
GBP/USD returned to the green as a dramatic week drew to a close. Markets witnessed a steep correction in the USD, courtesy of the US fundamental catalysts, offering a much-needed respite to the Pound Sterling buyers.
Starting the week, they jumped in on Monday, helping the pair rebound from the six-month low of 1.2488, set on November 22. The Greenback saw a bearish opening gap in tandem with the US Treasury bond yields and extended the downside in response to the weekend news that US President-elect Donald Trump named billionaire Scott Bessent as his Treasury Secretary. Bessent’s appointment to the critical position in the Trump administration reassured the US bond market as he is seen as a fiscal conservative.
The GBP/USD recovery paused on Tuesday after the Greenback found fresh safe-haven demand following US President-elect Donald Trump's announcement of a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China once he takes over his office on January 20. Intensifying risk aversion on the looming threat of a global trade war curbed appetite for high-beta currencies such as the British Pound.
However, USD sellers returned on Wednesday alongside risk appetite on easing geopolitical tensions between Israel and Lebanon. Reuters reported that “a ceasefire between Israel and Iran-backed group Hezbollah came into effect at 0200 GMT on Wednesday after US President Joe Biden said both sides accepted an agreement brokered by the United States and France.”
The US currency also suffered due to sustained expectations that the US Federal Reserve (Fed) will likely cut interest rates by 25 basis points (bps) in December. The weakness extended into Thanksgiving Thursday, especially after Wednesday’s US core Personal Consumption Expenditure (PCE) Price Index data failed to alter Fed rate cut expectations for next month.
The Fed’s preferred inflation gauge, the core PCE Price Index, increased at 0.3% on a monthly basis and an annual reading of 2.8%, aligning with market expectations. Thin trading conditions also left the Greenback miring in the weekly troughs, aiding the additional upswing in the Pound Sterling.
On Friday, nothing seemed different from the fundamental perspective as sentiment around the US Dollar remained tepid, pushing GBP/USD to the highest level in two weeks above 1.2700.
Meanwhile, there was no high-impact economic data from the UK during the week, while Bank of England (BoE) policymakers continued to voice caution about further rate cuts. Deputy Governor Clare Lombardelli said Tuesday that she needs to see more evidence of cooling price pressures before she backs another interest rate reduction, per Bloomberg.
The week ahead: Bailey, Powell and US payrolls in sight
An action-packed week unfolds after a relatively quiet one, with labor data from the US likely to dominate the week. In contrast, the UK economic calendar lacks any high-impact data releases in the upcoming week.
Apart from the data publication, risk sentiment will play a pivotal role in influencing the higher-yielding Pound Sterling as global trade war fears mount following US President-elect Donald Trump’s announcement of tariffs on Mexico, Canada, and China.
On Monday, the US Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) will stand out following the releases of the S&P Global final UK and US Manufacturing PMI reports.
The US JOLTS Job Openings Survey will be the only vital data published on Tuesday. Wednesday will feature the top-tier US ADP Employment Change and ISM Services PMI data. Additionally, appearances from BoE Governor Andrew Bailey and Fed Chairman Jerome Powell will hog the limelight that day.
Powell’s appearance will be his last public one before the Fed enters the ‘blackout period’ on December 7.
The usual weekly US Jobless Claims will be reported on Thursday, followed by BoE policymaker Megan Greene’s speech.
All eyes will be on Friday's critical US Nonfarm Payrolls (NFP) for fresh signs on labor market conditions and the Fed’s rate outlook.
Speeches from several Fed policymakers will be listed throughout the week and could be significant as the ‘blackout’ period kicks on Saturday ahead of the December 17-18 policy meeting.
GBP/USD: Technical Outlook
From a short-term technical outlook, the GBP/USD pair's downside risks remain intact as long as the 14-day Relative Strength Index (RSI) remains below the 50 level.
Despite the latest recovery, the leading indicators currently trade near 45.
Adding credence to the negative outlook, the pair charted dual Bear Crosses on the daily time frame.
On November 22, the 21-day Simple Moving Average (SMA) closed below the 200-day SMA, while the 50-day SMA cut the 100-day SMA from above on a daily closing basis on November 27.
The Pound Sterling needs a sustained break above the 200-day SMA at 1.2820 to initiate a meaningful uptrend toward the strong contention area near 1.2975, where the 50-day SMA and the 100-day SMA hang.
Further up, the 1.3000 psychological level could challenge the bearish commitments.
On the downside, strong support aligns at the 1.2600 round level, below which the weekly low of 1.2507 will be tested.
A failure to defend that level will open the downside toward the six-month low of 1.2487, followed by the May 9 low of 1.2446.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
- The Pound Sterling rebounded firmly against the US Dollar, snapping the losing streak.
- For further direction, GBP/USD looks to central bank chiefs Bailey and Powell, as well as US Nonfarm Payrolls data.
- Dual Bear Crosses and a bearish RSI could continue threatening the Pound Sterling recovery.
The Pound Sterling (GBP) snapped a two-week downtrend and staged a comeback against the US Dollar (USD), driving the GBP/USD pair back to the 1.2700 threshold.
Pound Sterling came up for air as USD buyers took a breather
GBP/USD returned to the green as a dramatic week drew to a close. Markets witnessed a steep correction in the USD, courtesy of the US fundamental catalysts, offering a much-needed respite to the Pound Sterling buyers.
Starting the week, they jumped in on Monday, helping the pair rebound from the six-month low of 1.2488, set on November 22. The Greenback saw a bearish opening gap in tandem with the US Treasury bond yields and extended the downside in response to the weekend news that US President-elect Donald Trump named billionaire Scott Bessent as his Treasury Secretary. Bessent’s appointment to the critical position in the Trump administration reassured the US bond market as he is seen as a fiscal conservative.
The GBP/USD recovery paused on Tuesday after the Greenback found fresh safe-haven demand following US President-elect Donald Trump's announcement of a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China once he takes over his office on January 20. Intensifying risk aversion on the looming threat of a global trade war curbed appetite for high-beta currencies such as the British Pound.
However, USD sellers returned on Wednesday alongside risk appetite on easing geopolitical tensions between Israel and Lebanon. Reuters reported that “a ceasefire between Israel and Iran-backed group Hezbollah came into effect at 0200 GMT on Wednesday after US President Joe Biden said both sides accepted an agreement brokered by the United States and France.”
The US currency also suffered due to sustained expectations that the US Federal Reserve (Fed) will likely cut interest rates by 25 basis points (bps) in December. The weakness extended into Thanksgiving Thursday, especially after Wednesday’s US core Personal Consumption Expenditure (PCE) Price Index data failed to alter Fed rate cut expectations for next month.
The Fed’s preferred inflation gauge, the core PCE Price Index, increased at 0.3% on a monthly basis and an annual reading of 2.8%, aligning with market expectations. Thin trading conditions also left the Greenback miring in the weekly troughs, aiding the additional upswing in the Pound Sterling.
On Friday, nothing seemed different from the fundamental perspective as sentiment around the US Dollar remained tepid, pushing GBP/USD to the highest level in two weeks above 1.2700.
Meanwhile, there was no high-impact economic data from the UK during the week, while Bank of England (BoE) policymakers continued to voice caution about further rate cuts. Deputy Governor Clare Lombardelli said Tuesday that she needs to see more evidence of cooling price pressures before she backs another interest rate reduction, per Bloomberg.
The week ahead: Bailey, Powell and US payrolls in sight
An action-packed week unfolds after a relatively quiet one, with labor data from the US likely to dominate the week. In contrast, the UK economic calendar lacks any high-impact data releases in the upcoming week.
Apart from the data publication, risk sentiment will play a pivotal role in influencing the higher-yielding Pound Sterling as global trade war fears mount following US President-elect Donald Trump’s announcement of tariffs on Mexico, Canada, and China.
On Monday, the US Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) will stand out following the releases of the S&P Global final UK and US Manufacturing PMI reports.
The US JOLTS Job Openings Survey will be the only vital data published on Tuesday. Wednesday will feature the top-tier US ADP Employment Change and ISM Services PMI data. Additionally, appearances from BoE Governor Andrew Bailey and Fed Chairman Jerome Powell will hog the limelight that day.
Powell’s appearance will be his last public one before the Fed enters the ‘blackout period’ on December 7.
The usual weekly US Jobless Claims will be reported on Thursday, followed by BoE policymaker Megan Greene’s speech.
All eyes will be on Friday's critical US Nonfarm Payrolls (NFP) for fresh signs on labor market conditions and the Fed’s rate outlook.
Speeches from several Fed policymakers will be listed throughout the week and could be significant as the ‘blackout’ period kicks on Saturday ahead of the December 17-18 policy meeting.
GBP/USD: Technical Outlook
From a short-term technical outlook, the GBP/USD pair's downside risks remain intact as long as the 14-day Relative Strength Index (RSI) remains below the 50 level.
Despite the latest recovery, the leading indicators currently trade near 45.
Adding credence to the negative outlook, the pair charted dual Bear Crosses on the daily time frame.
On November 22, the 21-day Simple Moving Average (SMA) closed below the 200-day SMA, while the 50-day SMA cut the 100-day SMA from above on a daily closing basis on November 27.
The Pound Sterling needs a sustained break above the 200-day SMA at 1.2820 to initiate a meaningful uptrend toward the strong contention area near 1.2975, where the 50-day SMA and the 100-day SMA hang.
Further up, the 1.3000 psychological level could challenge the bearish commitments.
On the downside, strong support aligns at the 1.2600 round level, below which the weekly low of 1.2507 will be tested.
A failure to defend that level will open the downside toward the six-month low of 1.2487, followed by the May 9 low of 1.2446.
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.