GBP to USD Forecast: Central Bank Chatter, US Data, and UK Retail Stats in Focus

Highlights

• The GBP/USD slid by 0.74% on Wednesday, ending the session at $1.26379.
• Softer-than-expected UK inflation numbers fueled bets on a Bank of England rate cut, sinking the GBP/USD.
• On Thursday, central bank chatter and US economic data will draw investor interest.

The Wednesday GBP/USD Overview

On Wednesday, the GBP/USD slid by 0.74%. Reversing a 0.67% gain from Tuesday, the GBP/USD ended the day at $1.26379. The GBP/USD rose to a high of $1.27345 before falling to a low of $1.26248.

UK CBI Distributive Trades and BoE Chatter in Focus

On Thursday, UK CBI Distributive Trade data will draw investor interest. The survey-based report offers the markets a litmus test of the UK retail sector. Economists consider the numbers as a leading indicator of consumer spending.

A larger-than-expected increase could counter bets on an H1 2024 Bank of England interest rate cut. An upward trend in consumer spending would fuel demand-driven inflation. A higher inflation trajectory would force the BoE to delay discussions about interest rate cuts.

An elevated interest rate environment affects borrowing costs and disposable income. Downward trends in disposable income and consumer spending would dampen demand-driven inflation.

Economists forecast the CBI Distributive Trades Index to increase from -11 to -6 in December.

Beyond the numbers, Bank of England commentary needs monitoring. Reaction to the UK inflation numbers would move the dial.

US GDP, Jobless Claims, and Manufacturing in Focus

On Wednesday, US jobless claims and the Philly Fed Manufacturing Index numbers will garner investor interest.

Tight labor market conditions could support wage growth and disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. An elevated inflation environment could force the Fed to delay rate cuts to curb spending.

Economists forecast initial jobless claims to increase from 202k to 215k in the week ending December 16.

Philly Fed Manufacturing Index figures also warrant investor attention. The US manufacturing sector contributes less than 30% to the economy, limiting the influence on Fed policy goals. However, an improving manufacturing sector environment would support bets on a soft landing. A pickup in US private sector activity could drive buyer demand for the US dollar.

Economists forecast the Philly Fed Manufacturing Index to rise from -5.9 to -3.0 in December.

Other stats include finalized Q3 GDP numbers. Revisions to preliminary figures need consideration.

Short-Term Forecast

Near-term trends for the GBP/USD will hinge on the US (Fri) inflation numbers. Sticky US inflation could tilt monetary policy divergence toward the US dollar. On Wednesday, UK inflation numbers raised bets on an H1 2024 Bank of England rate cut.

GBP to USD Price Action

Daily Chart

The GBP/USD held above the 50-day and 200-day EMAs, sending bullish price signals.

A GBP/USD break above the $1.27500 handle would bring the $1.28013 resistance level into play.

On Thursday, UK distributive trade data and the US economic calendar will influence the buyer appetite for the GBP/USD.

However, a GBP/USD drop below the $1.26000 handle would give the bears a run at the 50-day EMA.

The 14-period daily RSI reading of 54.91 suggests a GBP/USD move to the $1.28013 resistance level before entering overbought territory.

4-Hourly Chart

The GBP/USD sat below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A GBP/USD break above the 50-day EMA would bring the $1.28013 resistance level into play.

However, a fall below the $1.26 handle would give the bears a run at the 200-day EMA.

The 14-period RSI on the 4-hour Chart at 43.00 indicates a GBP/USD fall to the 200-day EMA before entering oversold territory.