GBP to USD Forecast: How Services PMIs and US Job Openings Drive Trends

Highlights

• The GBP/USD declined by 0.54% on Monday, ending the session at $1.26325.
• On Tuesday, UK service sector PMI numbers will draw investor interest.
• Later in the day, US JOLTs Job Openings and ISM Non-Manufacturing PMI numbers are also focal points.

The Monday GBP/USD Overview

On Monday, the GBP/USD fell by 0.54%. After a 0.62% gain on Friday, the GBP/USD ended the day at $1.26325. The GBP/USD rose to a Monday high of $1.27245 before falling to a low of $1.26036.

UK Services PMI Numbers in the Spotlight

On Tuesday, finalized UK Services PMI numbers will garner investor interest. An upward revision to the preliminary PMI would support buyer demand for the Pound. According to preliminary numbers, the UK Services PMI unexpectedly increased from 49.5 to 50.5 in November.

Significantly, a pickup in service sector activity would support the less dovish stance on rate cuts. The UK services sector accounts for over 70% of the UK economy. A pickup in service sector activity could boost wage growth and consumer sentiment. An upward trend in wage growth and consumer sentiment could fuel consumer spending and demand-driven inflation.

With the UK services PMIs in focus, investors must monitor BoE commentary throughout the session.

Earlier today, UK retail sales figures warranted investor attention. The BRC Retail Sales Monitor increased 2.6% year-over-year in November vs +2.6% in October. UK private consumption contributes over 60% to the UK economy. The November report fell short of forecasts. Economists forecast a 2.7% increase.

US Services and the Labor Market in Focus

On Tuesday, the all-important ISM Non-Manufacturing PMI and JOLTs Job Opening reports will be in focus. Weaker-than-expected service sector activity and a larger-than-expected fall in Job Openings would support bets on a Q1 2024 rate cut.

The US services sector contributes over 70% to the US economy and is the main contributor to inflation. Slower activity would ease inflationary pressures and raise the threat of a hard landing.

Deteriorating labor market conditions would impact wage growth and consumer confidence. The net effect would be a pullback in consumer spending, dampening demand-driven inflation and the need for a hawkish Fed rate path.

Short-Term Forecast

UK and US Services PMIs could dictate GBP/USD trends before the US Jobs Report on Friday. Better-than-expected numbers from the UK and weaker figures from the US would tilt policy divergence toward the Pound. Softer US wage growth numbers would also support the GBP/USD move toward $1.30.

GBP to USD Price Action

Daily Chart

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

A GBP/USD return to $1.27000 would support a move to the $1.28013 resistance level.

UK and US services PMIs and the US JOLTs Job Openings are focal points.

However, a GBP/USD drop below the $1.26000 handle would give the bears a run at the $1.24410 support level.

The 14-period daily RSI reading of 61.66 suggests a GBP/USD return to $1.27 before entering overbought territory.

4-Hourly Chart

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

A GBP/USD return to $1.27000 would support a move to the $1.28013 resistance level.

However, a break below the 50-day EMA would bring the $1.24410 support level into play.

The 14-period RSI on the 4-hour Chart at 46.51 suggests a GBP/USD fall below the $1.26 handle before entering oversold territory.