GBP/USD Price Forecast: Key Support at 1.2880 as Dollar Strength Pressures Sterling

The BoE recently cautioned that Chancellor Rachel Reeves‘ expansive Autumn Budget could increase inflation risks, signaling a possible hold on interest rate cuts in 2025. This outlook has brought a level of support to the pound, though it remains overshadowed by broader USD strength.

Market participants are watching key data from both sides of the Atlantic this week, with major releases likely to impact the GBP/USD trajectory.

• GBP/USD Recent Low: $1.2888

• BoE Caution: Inflation risk from fiscal policy

• Upcoming Data: UK job market, Q3 GDP, US CPI and PPI

BoE’s Hawkish Stance Meets Economic Uncertainty

The BoE’s cautious view, alongside upcoming economic releases, has added a layer of complexity to the GBP/USD outlook. UK job market data on Tuesday and preliminary Q3 GDP data on Friday are expected to influence sentiment around the pound.

Across the Atlantic, the U.S. will release Consumer Price Index (CPI) data on Wednesday, followed by the Producer Price Index (PPI) on Thursday and Retail Sales on Friday. These data points are anticipated to impact both currencies, with traders looking for direction amid economic crosswinds.

Investors remain cautious, with the potential for the BoE to keep rates steady contrasting with the possibility of ongoing strength in the USD. The mixed factors create uncertainty for GBP/USD, keeping traders on the sidelines as they await clearer signals from key economic data.

• Key UK Data: Job market and Q3 GDP

• US Data Releases: CPI, PPI, and Retail Sales

• Market Sentiment: Cautious amid mixed signals

USD Strength Driven by Inflation Expectations and Resilient Data

The U.S. dollar has held firm, buoyed by expectations that President-elect Donald Trump’s policies could fuel inflation. Higher inflation might limit the Federal Reserve’s ability to cut rates aggressively, a factor supporting the dollar’s strength.

Recent U.S. economic data, such as the University of Michigan Consumer Sentiment Index rising to 73.0, reflects consumer optimism, reinforcing the dollar’s appeal. Weekly jobless claims were close to expectations at 221,000, indicating a stable labor market.

Federal Reserve Chair Jerome Powell has emphasized a data-driven approach, suggesting that future policy adjustments will rely on incoming economic indicators. Despite the BoE’s hawkish outlook, the U.S. dollar’s positive momentum, supported by solid economic data, remains a significant hurdle for GBP/USD.

• USD Strength: Bolstered by inflation expectations

• Fed’s Stance: Data-driven approach to policy

• Economic Indicators: Consumer sentiment and jobless claims solid

EURUSD and GBPUSD still look dodgy to me…at this stage. Prob need another high. If not dollar will regain its strength and make another high again

— Psibirskiy (@Psibirskiy) November 8, 2024

Daily Technical Outlook: GBP/USD – November 11, 2024

The GBP/USD pair hovers near the $1.2882 level, within a descending triangle pattern indicating continued pressure. The immediate pivot level at $1.2937 serves as a critical threshold for any potential recovery.

Immediate resistance aligns with the 50-day Exponential Moving Average (EMA) at $1.2944, followed by further resistance at $1.3010 and $1.3046. On the downside, key support is at $1.2864, with additional support levels at $1.2828 and $1.2793. The Relative Strength Index (RSI) at 48.67 suggests a neutral to slightly bearish sentiment, indicating caution for traders.

Key Insights:

• GBP/USD trades near the $1.2937 pivot, a key recovery level.

• Immediate resistance is at $1.2944, aligned with the 50 EMA.

• RSI at 48.67 signals a neutral to bearish outlook, indicating potential pressure on the downside.