- The weekly outlook for GBP/USD remains slightly weak as markets pared partial weekly gains amid dollar recovery and profit-taking.
- The Fed’s reliance on data and a resilient UK economy continue to balance out the GBP/USD pair.
- Market participants are looking to the US NFP and Bank of England interest rate decision to gauge further directional bias.
The GBP/USD rate ended its second straight week in gains as markets expected a dovish Bank of England following resilient economic data in the UK. Meanwhile, the US dollar fell to four-year lows on concerns about geopolitics and the independence of the Federal Reserve before finding a moderating footing.
–Are you interested in learning more about Bitcoin price forecast? Check out our detailed guide-
The pair hit new highs since October 2021 near 1.3860 before correcting lower below the mid-1.3700s. The decline that occurred on Thursday and Friday was attributed to the agreement between President Trump and the US Senate to avoid a US government shutdown. Furthermore, Trump nominated Kevin Warsh as the next Chairman of the Federal Reserve, which further weakened the dollar.
On the data front, the UK economic calendar was light with no major releases, while the US Federal Open Market Committee meeting was the highlight of the week. As widely expected, the central bank kept interest rates unchanged, while Fed Chair Powell’s press conference provided no clarity for markets, reiterating a data-driven approach.
US Producer Price Index data on Friday beat expectations, with core PPI and monthly PPI coming in at 0.7% and 0.5% respectively. This indicates steady inflation, which enhances the odds of delayed cuts.
Meanwhile, geopolitical developments surrounding Iran and the Russia-Ukraine conflict continue to deteriorate risk appetite, making the upward path for GBP/USD bumpy.
Key events for GBP/USD next week:
Going forward, the following key events may significantly impact the pair’s volatility:
- Bank of England Interest Rate Policy Statement
- US ISM Manufacturing/Services PMI
- Job opportunities in JOLTs
- Non-Farm Employment Change ADP
- Average hourly earnings m/m
- Unemployment rate
- Consumer confidence is a priority
- Initial inflation expectations
With several high-impact events on the list, market participants will be keen to monitor the Bank of England interest rate, which is widely expected to remain on hold. However, the split in MPC votes could be crucial in gauging sentiment regarding the next rate cut.
On the other hand, US labor market data remains a vital factor for the Fed to shape its monetary policy. Nonfarm payrolls numbers are expected to jump from 50K to 75K, while the unemployment rate may remain at 4.4%. Any significant deviation from these expectations could lead to a sharp move.
GBP/USD Weekly Technical Forecast: Correction amid Profit Taking
The daily chart of GBP/USD is showing a corrective downtrend after briefly breaking the supply zone above 1.3850. The pair lost more than 100 pips, with the RSI falling below 50.0, indicating more losses on the ticket. However, the 1.3700 level could stop the downtrend ahead of the next support at 1.3600 (round number) and then the supply-matched demand zone near 1.3500.
–Are you interested in learning more about Scalping Forex Brokers? Check out our detailed guide-
On the upside, key resistance is at 1.3800, ahead of the monthly high at 1.3860, and then at 1.3925. The chances of testing the 1.4000 level are slim at the moment, as profit taking has put pressure on the pair. However, the pair could gain buying strength around key support areas to rally to new highs as the broad uptrend remains intact while remaining above the key moving averages.
Are you looking to trade Forex now? Invest in eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money
