GBP to USD Forecast: UK Retail Sales and GDP in Spotlight

Highlights

• The GBP/USD gained 0.41% on Thursday, ending the session at $1.26893.
• US economic indicators reversed early losses for the GBP/USD.
• On Friday, UK GDP and retail sales numbers warrant investor attention before the US session.

The Thursday GBP/USD Overview

On Thursday, the GBP/USD gained 0.41%. After a 0.74% decline on Wednesday, the GBP/USD ended the day at $1.26893. The GBP/USD fell to a low of $1.26124 before striking a high of $1.26959.

UK GDP and Retail Sales in the Spotlight

UK retail sales and Q3 GDP numbers will garner investor interest on Friday. A larger-than-expected rise in retail sales could reduce bets on an H1 2024 Bank of England rate cut.

Consumer spending could fuel demand-driven inflation. Significantly, the Bank of England may delay discussions on rate cuts to curb consumer spending and dampen inflationary pressures. The UK inflation numbers from Wednesday fueled bets on an H1 2024 interest rate cut. Upbeat consumer spending could counter the influence of the inflation numbers on the Pound.

Economists forecast retail sales to increase by 0.4% in November (Oct: -0.3%).

Investors must also consider Q3 GDP numbers. Revisions to preliminary numbers would move the dial. However, the retail sales figures may impact BoE policy goals more. According to preliminary numbers, the UK economy stalled in the third quarter.

US Inflation and Personal Income/Spending in Focus

On Friday, the US Personal Consumption Expenditures Report warrants investor attention. Core PCE Price Index and personal income/spending figures will move the dial. Better-than-expected personal income/spending numbers and sticky inflation could reduce bets on a Q1 2024 Fed rate cut.

A pickup in personal income and spending could fuel demand-driven inflation. In response, the Fed may delay interest rate cuts to curb consumer spending and dampen inflationary pressures.

Economists forecast the Core PCE Price Index to increase by 3.3% year-over-year in November vs. 3.5% in October. Significantly, economists expect upward trends in personal income and spending.

Beyond the numbers, FOMC member commentary needs monitoring. Reactions to the US economic indicators need consideration.

Short-Term Forecast

Near-term trends for the GBP/USD will hinge on the UK retail sales and US inflation numbers. Hotter-than-expected US inflation would tilt monetary policy divergence toward the US dollar. However, better-than-expected UK retail sales could temper bets on an H1 2024 BoE rate cut.

GBP to USD Price Action

Daily Chart

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

A GBP/USD return to the $1.27500 handle would give the bulls a run at the $1.28013 resistance level.

On Friday, UK GDP, retail sales, and the US economic calendar will influence buyer demand for the GBP/USD.

However, a GBP/USD fall through the $1.26500 handle would bring the 50-day EMA into play.

The 14-period daily RSI reading of 57.15 indicates a GBP/USD break above the $1.28013 resistance level before entering overbought territory.

4-Hourly Chart

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

A GBP/USD move to the $1.27500 handle would bring the $1.28013 resistance level into play.

However, a break below the 50-day EMA would support a fall toward the 200-day EMA.

The 14-period RSI on the 4-hour Chart at 52.42 suggests a GBP/USD move to the $1.28013 resistance level before entering overbought territory.