GBP to USD Forecast: UK Pound Reacts to PMI Slide; News from Jackson Hole Eyed.

Highlights

• GBP/USD faced a modest dip on Wednesday, ending at $1.27221, influenced by Fed rate hike speculations.
• August’s UK private sector PMI hints at an economic downturn; bets on dual BoE hikes decelerate.
• Jackson Hole Symposium’s Fed discussions are vital as US PMI data empowers dovish sentiments; a hawkish twist looms.

Wednesday Overview

On Wednesday, the GBP to USD slipped by 0.07% to wrap up the day at $1.27221. The GBP/USD rose to an early high of $1.27646 before sliding to a low of $1.26144. However, easing bets on a Fed rate hike supported a US session recovery.

Bears Target a Three-Day Losing Streak

There are no UK economic indicators for investors to consider today. The lack of UK economic indicators will leave the GBP to USD in the hands of market risk sentiment and bets on BoE interest rate hikes.

UK private sector PMI numbers for August increased the chance of a UK economic recession. The latest numbers also eased bets on two BoE interest rate hikes before hitting the brakes.

US private sector PMI numbers provided the GBP/USD with late support on Wednesday. However, the weaker numbers will also raise concerns over the US economy, with recessionary fears likely to weigh on the GBP/USD.

No Bank of England Monetary Policy Committee Members are on the calendar to speak today. Following the August PMI numbers, investors should monitor the news wires for BoE member commentary. Dovish comments in response to the latest retail sales and PMI numbers would be bearish for the GBP/USD pair.

US Labor Market and Durable Goods Orders in Focus

US core durable goods orders and jobless claims are in focus today. Following the disappointment of the private sector PMIs, a spike in initial jobless claims would be bullish for the GBP/USD pairing.

Core durable goods orders will also influence as investors closely monitor the economic indicators. Another weak set of economic indicators will raise the chances of a US economic recession and reduce the expectation of a September Fed rate hike.

However, sentiment toward the latest economic indicators suggest a GBP/USD retreat. US service sector activity continued to expand while the UK services sector contracted for the first time since January.

The service sector contributes more than 70% to the UK and US economies, increasing GBP/USD sensitivity to the numbers.

Away from the numbers, investors should monitor Fed chatter from the Jackson Hole Symposium. The latest PMI numbers will likely give the Fed doves a stronger voice. Hawkish Fed commentary would catch investors by surprise and sink the GBP/USD.

GBP to USD Price Action

The Daily Chart showed the GBP to USD below the $1.2785 – $1.2862 resistance band. Looking at the EMAs, the GBP to USD sat below the 50-day EMA while holding above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

Looking at the 14-Daily RSI, 45.59 reflects a bearish sentiment. The RSI signals a return to sub-$1.2650 to bring the $1.2520 – $1.2440 support band into view. However, a move through the 50-day EMA would give the bull a run at the lower level of the $1.2785 – $1.2862 resistance band to target $1.2850.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD sits below the $1.2785 – $1.2862 resistance band. After the bearish Wednesday session, the GBP to USD remains below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

The 14-4H RSI reading of 48.35 reflects bearish sentiment, with selling pressure outweighing buying pressure. Significantly, the RSI aligns with the EMAs, signaling a return to $1.2650. However, a GBP/USD move through the 50-day EMA would give the bulls a run at the 200-day EMA and the lower level of the $1.2785 – $1.2862 resistance band.