GBP to USD Forecast: BoE Governor Andrew Bailey in the Spotlight

Highlights

• The GBP/USD gained by 0.02% on Friday, ending the session at $1.22255.
• UK GDP numbers sent mixed signals, leaving the GBP/USD with a modest gain.
• On Monday, the BoE, the Fed, and US consumer optimism figures will provide direction to the GBP/USD.

The Friday GBP/USD Overview

On Friday, the GBP/USD gained 0.02%. After a 0.50% loss on Thursday, the GBP/USD ended the day at $1.22255. The GBP/USD rose to a high of $1.22378 before falling to a low of $1.21870.

Bank of England in Focus

On Monday, the Bank of England will be in the spotlight. Bank of England Governor Andrew Bailey and Chief Economist Huw Pill delivered contrasting forward guidance on monetary policy in recent speeches.

BoE Governor Andrew Bailey could set the record straight. Governor Bailey is a panelist at the Risk Minds International Conference. References to the economic outlook, inflation, and interest rates need consideration.

However, Monetary Policy Committee members Sarah Breeden and Catherine Mann will also speak on Monday. Dovish comments relating to the BoE interest rate path could affect the buying appetite for the Pound.

There are no UK economic indicators for investors to consider before UK labor market numbers on Tuesday.

US Consumer Optimism and the Fed in Focus

On Monday, US consumer optimism figures for November will draw investor interest. An unexpected fall in consumer optimism could signal a downward trend in consumer spending.

Economists forecast the IBD/TIPP Economic Optimism Index to increase from 36.3 to 40.2. Notably, an Index below 50 signals consumer pessimism toward the economy and the economic outlook.

A negative consumer spending outlook could ease pressure on the Fed to maintain a hawkish rate path. However, US private consumption contributes over 60% to the US economy. A weak consumer spending outlook could also fuel fears of a hard landing.

Beyond the numbers, Fed speakers also need monitoring. FOMC voting member Lisa Cook is on the calendar to speak on Monday. Comments regarding the economic outlook, inflation, and interest rates will influence the appetite for the US dollar.

Short-Term Forecast

The near-term trend for the GBP/USD will hinge on the US CPI Report and UK wage growth numbers out on Tuesday. Hotter-than-expected US inflation and softer UK wage growth could tilt monetary policy divergence toward the US dollar. Hawkish Fed rate path bets could support a GBP/USD drop below $1.21500.

GBP to USD Price Action

Daily Chart

The GBP/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A GBP/USD fall below $1.22 would give the bears a run at the $1.21216 support level.

BoE and Fed speakers and US consumer optimism will be the focal points on Monday.

However, a break above the 50-day EMA would bring the 200-day EMA and the $1.24410 resistance level into view.

The 14-period daily RSI reading of 49.22 indicates a GBP/USD fall through the $1.21216 support level before entering oversold territory.

4-Hourly Chart

The GBP/USD sits below the 50-day and 200-day EMAs, reaffirming bearish price signals. Notably, the 50-day and 200-day EMAs remain converged after the bearish cross.

A move through the EMAs would bring the $1.24410 resistance level into view.

However, a fall below the $1.22000 handle would give the bears a run at the $1.21216 support level.

The 14-period RSI on the 4-hour Chart at 43.19 suggests a GBP/USD fall to $1.21500 before entering oversold territory.