GBP to USD Forecast: UK Construction PMI Numbers and the BoE in Focus

Highlights

• The GBP/USD surged 1.43% on Friday, ending the session at $1.23775.
• US labor market data and a softer-than-expected ISM Services PMI drove buyer appetite for the GBP/USD.
• On Monday, Fed and BoE speeches could impact buyer demand for the GBP/USD.

The Friday GBP/USD Overview

On Friday, the GBP/USD surged 1.43%. Following a 0.43% gain on Thursday, the GBP/USD ended the session at $1.23775. The GBP to USD fell to a low of $1.21843 before rising to a Friday high of $1.23896.

UK Construction Sector and the Bank of England in Focus

On Monday, the UK construction sector will be in focus. The UK construction sector accounts for less than 10% of the economy. However, a deteriorating sector conditions could signal a gloomier outlook for the UK economy. Falling house prices and elevated mortgage rates impact consumer sentiment and disposable income, signaling a weak consumption outlook.

UK private consumption contributes over 60% to the economy, giving the real estate sector an influence on the economic outlook.

Economists forecast the S&P Global/CIPS Construction PMI to increase from 45 to 46 in October. An unexpected decline could affect the appetite for the Pound.

Late in the Monday session, Bank of England (BoE) Chief Economist Huw Pill will attend the Monetary Policy Report virtual Q&A. The markets are betting on the BoE cutting interest rates in its next move. Forward guidance on the economy, inflation, and monetary policy will impact the GBP/USD. Hawkish comments could deliver another breakout as investors wind down bets on further Fed rate hikes.

FOMC Member Speeches in Focus

On Friday, FOMC member commentary will draw interest following the US Jobs Report and ISM Services PMI survey. The recent economic indicators have fueled bets on the Fed ending the rate hike cycle. Unexpectedly hawkish comments about the US economy and interest rates could fuel demand for the US dollar.

FOMC voting member Lisa Cook is on the calendar to speak on Monday.

Short-Term Forecast

Near-term GBP/USD trends will hinge on BoE and Fed speeches ahead of UK GDP numbers on Friday. However, the gloomy outlook for the UK economy could cap the upside, with the GBP/USD also exposed to market risk sentiment.

GBP to USD Price Action

Daily Chart

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

A break above the 200-day EMA would support a move to the $1.24410 resistance level.

UK construction data, the BoE monetary policy virtual Q&A, and Fed commentary will be focal points.

A drop below the 50-day EMA could support a fall to $1.2250.

The 14-period daily RSI reading of 62.30 suggests a GBP/USD move to the $1.24410 resistance level before entering overbought territory.

4-Hourly Chart

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

A return to $1.24 would support a break above the $1.24410 resistance level.

However, a drop below $1.23 would bring the 200-day EMA into play.

With an RSI reading of 73.60 for the 14-period 4-hourly Chart, the GBP/USD hovers in overbought territory. Selling pressure could intensify on weak UK stats and a dovish BoE.