GBP to USD Forecast: US Jobs Report and Consumer Confidence in the Spotlight

Highlights

• The GBP/USD gained 0.22% on Thursday, ending the session at $1.25876.
• Bank of England forward guidance continues to signal a hold-for-longer outlook.
• On Friday, the US Jobs Report will be the focal point.

The Thursday GBP/USD Overview

On Thursday, the GBP/USD gained 0.22%. After a 0.24% loss on Wednesday, the GBP/USD ended the day at $1.25876. The GBP/USD fell to a Thursday low of $1.25440 before rising to a high of $1.26127.

Bank of England Policy vs UK Economy

This week, Bank of England Governor Andrew Bailey remained committed to keeping interest rates at current levels. However, the BoE Governor also acknowledged possible risks to financial stability.

Despite the commitment to higher for longer, the UK economy may feel the effects of elevated interest rates. A deteriorating macroeconomic environment could force the BoE to cut rates at a more marked pace, and tilt policy divergence toward the US dollar.

UK economic indicators out next week before the BoE Interest Rate Decision (Thurs) could prove pivotal. Employment (Tues) and the monthly GDP Report (Wed) will guide the BoE and the GBP/USD.

US Jobs Report and Consumer Confidence in the Spotlight

The US Jobs Report and Michigan Consumer Sentiment survey will garner investor interest on Friday. A hotter-than-expected US Jobs Report would reduce bets on a Q1 2024 Fed rate cut. While the nonfarm payroll numbers need consideration, wage growth and the unemployment rate could have more impact.

A steady unemployment rate and an upward trend in wage growth could increase disposable income. Increases in disposable income could fuel consumer spending and demand-driven inflation, supporting a hawkish Fed rate path.

Economists forecast the US unemployment rate to hold steady at 3.9%. However, economists expect average hourly earnings to increase by 0.3% in November vs. 0.2% in October.

Consumer confidence numbers will also influence the appetite for the US dollar. An improving consumer confidence environment could signal a positive consumer spending outlook. A more positive outlook could influence inflation trends and the Fed rate path.

Economists forecast the Michigan Consumer Sentiment Index to increase from 61.3 to 62.0 in December. However, the sub-components also need consideration. Economists predict the Inflation Expectations Index to hold steady at 4.5%.

Short-Term Forecast

Near-term GBP/USD trends will hinge on the US Jobs Report and the UK Reports next week. Hotter-than-expected US wage growth could impact bets on a Fed rate cut and drive buyer demand for the US dollar.

GBP to USD Price Action

Daily Chart

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

A GBP/USD move to $1.26000 would give the bulls a run at the $1.27 handle.

The US Jobs Report will be the market focal point on Friday.

However, a GBP/USD fall through the $1.25500 handle would bring the 50-day EMA and the $1.24410 support level into play. Buying pressure could intensify at $1.24600. The 50-day EMA is confluent with the $1.24410 support level.

The 14-period daily RSI reading of 57.59 suggests a GBP/USD return to $1.27 before entering overbought territory.

4-Hourly Chart

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

A GBP/USD move through the 50-day EMA would support a run at the $1.27 handle.

However, a drop below the $1.25500 handle would give the bears a run at the 200-day EMA and the $1.24410 support level.

The 14-period RSI on the 4-hour Chart at 45.78 suggests a GBP/USD drop to the $1.25000 handle before entering oversold territory.