GBP to USD Forecast: UK House Prices and the Chicago PMI to Wrap Up 2023

Highlights

• The GBP/USD declined by 0.51% on Thursday, ending the session at $1.27322.
• US economic indicators impacted the buyer appetite for the GBP/USD.
• On Friday, UK house prices and the Chicago PMI will be focal points.

The Thursday GBP/USD Overview

On Thursday, the GBP/USD declined by 0.51%. Partially reversing a 0.58% rally on Wednesday, the GBP/USD ended the day at $1.27322. The GBP/USD rose to a high of $1.28273 before falling to a low of $1.27121.

UK House Prices: Leading Economic Indicators

On Friday, UK house prices for December will garner investor interest. Economists consider housing sector economic data as leading indicators for the UK economy.

A pickup in house prices would signal an increasing demand environment. Increasing demand could fuel consumer spending and demand-driven inflationary pressures. The net effect could be a delay in the Bank of England kickstarting rate cut discussions.

Economists forecast UK house prices to stall in December vs. a 0.2% increase in November. Better-than-expected numbers could drive buyer demand for the GBP/USD.

Beyond the numbers, Bank of England commentary also needs monitoring. References to the economic outlook, inflation, and interest rates need consideration.

The US Chicago PMI in the Spotlight

On Friday, US Chicago PMI numbers for December will draw investor interest. Private sector PMI numbers from Richmond and Dallas delivered mixed signals. The Chicago PMI has more weighting. A marked decline in the Chicago PMI would fuel further bets on a Q1 2024 Fed rate cut. However, a slump below 50 could reignite fears of a hard landing.

Economists forecast the Chicago PMI to fall from 55.8 to 51.0 in December.

Investors must also track Fed commentary. Comments on inflation, the economic outlook, and interest rates would move the dial.

Short-Term Forecast

Near-term GBP/USD trends will depend on the Bank of England’s commitment to keep rates higher for longer. A shift in forward guidance in response to a deteriorating macroeconomic environment could tilt monetary policy divergence toward the US dollar. Based on recent US economic indicators, the US economy remains on course for a soft landing.

GBP to USD Price Action

Daily Chart

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

A break above the $1.28013 resistance level would support a move to the $1.29 handle.

The UK house prices, the Chicago PMI, and central bank commentary need consideration.

However, a GBP/USD fall through the $1.27 handle would bring the 50-day EMA into view.

The 14-period daily RSI reading of 58.51 suggests a GBP/USD move to the $1.28500 handle before entering overbought territory.

4-Hourly Chart

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

A break above the $1.28013 resistance level would support a move to the $1.29 handle.

However, a fall through the 50-day EMA would bring sub-$1.26 and the 200-day EMA into play.

The 14-period RSI on the 4-hour Chart at 51.25 suggests a GBP/USD move to the $1.28500 handle before entering overbought territory.