GBP/USD Forecast: Dovish BoE bets could cap Pound Sterling's rebound
- GBP/USD went into a consolidation phase near 1.2650 following Wednesday's drop.
- Pound Sterling could have a hard time staging a steady recovery.
- Markets await Jobless Claims and Q3 GDP (revision) data from the US.
GBP/USD stabilized near 1.2650 early Thursday after losing nearly 100 pips on Wednesday. Although the near-term technical outlook points to a loss of bearish momentum, the pair could have a difficult time rising steadily following the soft inflation readings from the UK.
Market positioning shifted toward an earlier Bank of England (BoE) policy pivot after the UK Consumer Price Index (CPI) readings for November came in below analysts' forecasts on Wednesday. Goldman Sachs said that they now see the BoE opting for a 25 basis points rate cut in May, compared to June before 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 weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.48% | 0.25% | -0.20% | -0.70% | 0.65% | -0.59% | -0.97% | |
| EUR | 0.47% | 0.69% | 0.29% | -0.22% | 1.13% | -0.10% | -0.49% | |
| GBP | -0.26% | -0.73% | -0.45% | -0.96% | 0.40% | -0.84% | -1.23% | |
| CAD | 0.20% | -0.29% | 0.41% | -0.51% | 0.84% | -0.40% | -0.78% | |
| AUD | 0.70% | 0.23% | 0.92% | 0.52% | 1.35% | 0.12% | -0.26% | |
| JPY | -0.66% | -1.13% | -0.40% | -0.82% | -1.36% | -1.24% | -1.62% | |
| NZD | 0.57% | 0.09% | 0.82% | 0.38% | -0.12% | 1.22% | -0.40% | |
| CHF | 0.96% | 0.49% | 1.21% | 0.78% | 0.28% | 1.60% | 0.40% |
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).
Meanwhile, the US Dollar (USD) struggles to find demand early Thursday and helps GBP/USD keep its footing. US stock index futures were last seen rising between 0.4% and 0.6%, reflecting an improving risk mood. In case Wall Street's main indexes open higher and gather bullish momentum in the second half of the day, the USD could continue to weaken against its peers.
The US economic docket will feature the final revision to the third-quarter Gross Domestic Product growth alongside the weekly Initial Jobless Claims. If the number of first-time applications for unemployment benefits rise at a stronger pace than anticipated, the USD could come under pressure with the immediate reaction. On the other hand, a reading at or below 200K could provide a boost to the USD and trigger another leg lower in GBP/USD.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart recovered toward 50 and GBP/USD stabilized near the 100-period Simple Moving Average (SMA), currently located at 1.2650, highlighting a loss of bearish momentum.
On the upside, 1.2700 (lower limit of the long-term ascending regression channel) aligns as strong resistance. In case the pair manages to return within the ascending channel by confirming this level as support, technical buyers could show interest. In this scenario, 1.2750 (static level) and 1.2790-1.2800 (mid-point of the ascending channel, psychological level) could be seen as next resistances.
If GBP/USD fails to reclaim 1.2650, sellers could take action. In this case, 1.2600 (Fibonacci 23.6% retracement of the latest uptrend) and 1.2540 (200-period SMA) could be set as next bearish targets.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
