- GBP/USD recovered above 1.2650 after closing in the red on Wednesday.
- The US Dollar struggles to find demand ahead of key inflation data.
- The pair could face stiff resistance at 1.2700.
GBP/USD staged a late rebound on Wednesday but ended up closing the day in negative territory. The pair clings to small daily gains above 1.2650 early Thursday as the US Dollar (USD) struggles to find demand ahead of key inflation data.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.27% | 0.08% | 0.55% | 0.94% | -0.47% | 1.53% | -0.34% | |
| EUR | 0.28% | 0.35% | 0.83% | 1.22% | -0.19% | 1.81% | -0.07% | |
| GBP | -0.06% | -0.33% | 0.50% | 0.89% | -0.53% | 1.46% | -0.39% | |
| CAD | -0.56% | -0.83% | -0.51% | 0.40% | -1.03% | 0.99% | -0.90% | |
| AUD | -0.97% | -1.23% | -0.88% | -0.39% | -1.42% | 0.62% | -1.30% | |
| JPY | 0.47% | 0.20% | 0.55% | 1.02% | 1.41% | 2.00% | 0.13% | |
| NZD | -1.57% | -1.83% | -1.50% | -1.00% | -0.61% | -2.03% | -1.92% | |
| CHF | 0.35% | 0.07% | 0.39% | 0.91% | 1.30% | -0.12% | 1.88% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The Personal Consumption Expenditures (PCE) Price Index is forecast to rise 2.4% on a yearly basis in January, at a softer pace than the 2.6% increase recorded in December. The Core PCE Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, is expected to rise 0.4% on a monthly basis.
In case the monthly Core PCE inflation comes in hotter than anticipated, the immediate market reaction could provide a boost to the USD. Although investors see only a small chance of the Federal Reserve cutting the policy rate in May, a strong inflation data could cause markets to reassess the total number of rate cuts this year. According to the CME FedWatch Tool, there is nearly a 75% probability that the Fed will reduce the policy rate by a total of 75 basis points in 2024.
On the other hand, a reading near December's 0.2% increase, or lower, could weigh on the USD and help GBP/USD edge higher. In this scenario, an improving risk mood could help the pair push higher after Wall Street's opening bell. At the time of press, US stock index futures were down between 0.3% and 0.4%.
GBP/USD Technical Analysis
GBP/USD holds above 1.2650, where the Fibonacci 23.6% retracement of the long-term uptrend and the 200-period Simple Moving Average (SMA) on the 4-hour chart align. If the pair drops below that level and confirms it as resistance, technical sellers could take action. In this scenario, 1.2630 (100-period SMA) could act as interim support before 1.2600 (psychological level, static level).
On the upside, 1.2680 (ascending trend line) aligns as first resistance before 1.2700 (psychological level, static level). With a decisive break above the latter, GBP/USD could target 1.2740 (static level) next.
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