GBP to USD Forecast: FOMC Members to Bring Sub-$1.17 into View

It is a quiet day for the GBP/USD, with no economic indicators from the UK for the markets to consider.

The lack of stats leaves the Pound in the hands of market risk sentiment through the early part of the day. A pickup in market risk appetite provided support this morning.

However, the UK economic outlook and sentiment towards the Bank of England monetary policy remain central themes. Despite recent economic indicators, the markets are expecting economic conditions to deteriorate. Weaker UK economic conditions could impact the Bank of England’s policy goals to tackle inflation.

With no stats to consider, Bank of England chatter will draw interest. While no Monetary Policy Committee members are due to speak until tomorrow, investors will need to monitor any comments to the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.25% to $1.18504. A mixed start to the day saw the GBP/USD fall to an early low of $1.18103 before rising to a high of $1.18636.

Technical Indicators

The Pound needs to avoid the $1.1832 pivot to target the First Major Resistance Level (R1) at $1.1886 and the Monday high of $1.18968. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.1951. The Third Major Resistance Level (R3) sits at $1.2069.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1767 into play. However, barring a risk-off-fueled pullback, the GBP/USD should avoid sub-$1.17. The Second Major Support Level (S2) at $1.1714 should limit the downside.

The Third Major Support Level (S3) sits at $1.1595.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.17763. The 50-day EMA widened from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.17763) would support a breakout from R1 ($1.1886) to target R2 ($1.1951). However, a fall through the 50-day EMA ($1.17763) would give the bears a run at sub-$1.17. The 200-day EMA sits at $1.15475.

The US Session

It is a quiet day ahead on the US economic calendar. There are no US economic indicators for the markets to consider. However, Fed chatter will draw interest throughout the US session.

FOMC members Mester, George, and Bullard will deliver speeches later today. Hawkish Fed chatter could send the GBP/USD to sub-$1.17. However, FOMC members have given mixed signals, raising doubts over a 75-basis point hike in December.

The probability of a 75-basis point December rate hike had fallen to 14.6% before rising to 24.2% over the weekend. This morning, the likelihood of a 75-basis point rate hike eased back to sub-20% before returning to 24.2%, according to the FedWatch Tool.