GBP to USD Forecast: Path to $1.26 Hinges on US Services PMI Data

Highlights

• The GBP/USD gained 0.31% on Thursday, ending the session at $1.25321.
• UK private sector PMI numbers for November supported buyer demand for the GBP/USD.
• On Friday, the US services sector PMI and subcomponents will be in focus.

The Thursday GBP/USD Overview

On Thursday, the GBP/USD gained 0.31%. After a 0.35% loss on Wednesday, the GBP/USD ended the day at $1.25321. The GBP/USD fell to a low of $1.24831 before rising to a Thursday high of $1.25697.

UK Consumer Confidence Offers Pre-US Session Support

UK consumer confidence figures drew interest before the European opening bell on Friday. The GfK Consumer Confidence Index climbed from -30 to -24 in November. Economists forecast an increase to -28. The numbers could influence the outlook for spending and the Bank of England’s view on the economy and inflation.

A pickup in consumer confidence would support an uptrend in consumer spending. Increasing consumer demand could fuel demand-driven inflation and delay BoE discussions on rate cuts. A higher-for-longer rate path would maintain higher borrowing costs, impacting spending power and consumer demand.

The better-than-expected UK Services PMI numbers for November and consumer sentiment figures align with BoE Governor Bailey’s stance on monetary policy. The BoE Governor recently said it was far too soon to discuss interest rate cuts.

There are no other UK economic indicators for investors to consider. Market risk sentiment could influence buyer appetite for the GBP/USD.

US Services Sector in the Spotlight

On Friday, the US Services sector will garner investor interest. The US services sector contributes over 70% to the US economy. An unexpected pickup in service sector activity could ease bets on a May Fed rate cut. However, investors must consider the subcomponents.

Easing price pressures could dampen demand-driven inflationary pressures and the need for a hawkish Fed rate path. The services sector is the main contributor to US consumer price inflation.

Economists forecast the US Services PMI to decline from 50.6 to 50.4 in November.

Short-Term Forecast

Near-term GBP/USD trends hinge on the US services PMI and the prices subcomponent. An unexpected contraction in the US services sector would fuel bets on a May Fed rate cut. In contrast, recent UK economic indicators support BoE Governor Bailey’s higher-for-longer rate path forecast.

GBP to USD Price Action

Daily Chart

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

A GBP/USD move through $1.25500 would give the bulls a run at the $1.26 handle. A return to $1.26 would bring the $1.28013 resistance level into view.

Market risk sentiment and US services PMI numbers will likely dictate GBP/USD price trends.

However, a GBP/USD fall through the $1.25 handle would give the bears a run at the $1.24410 support level.

The 14-period daily RSI reading of 64.19 suggests a GBP/USD move to $1.26 before entering overbought territory.

4-Hourly Chart

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

A return to $1.25500 would support a move to the $1.26 handle.

However, a fall below the $1.25 handle would bring the 50-day EMA and the $1.24410 support level.

The 14-period RSI on the 4-hour Chart at 60.86 suggests a move to $1.26 before entering overbought territory.