GBP to USD Forecasts: $1.30 in the Hands of BoE Gov Bailey and the Fed

Highlight

• The GBP to USD had a bearish start to the week, with inflation numbers from China weighing.
• There are no UK or US economic indicators to shift sentiment toward BoE and Fed monetary policy expectations.
• However, central bank commentary will influence, with BoE and Fed speakers in focus.

It is a quiet day ahead for the GBP to USD. There are no UK economic indicators to provide direction.

With no UK economic indicators to consider, investors should monitor Bank of England chatter. Bank of England Governor Andrew Bailey is on the calendar to speak today. Speaking at the Financial and Professional Services Dinner (1600 BST), hawkish chatter would support the GBP to USD move toward $1.30.

Away from the economic calendar, updates on the US Treasury Secretary Janet Yellen visit to Beijing are bullish. Yellen reportedly said that 10 hours of meetings were direct and productive.

The US Session

It is also a quiet day on the US economic calendar. After the recent labor market and service sector stats, FOMC member commentary will draw interest today. FOMC members Barr, Bostic, Daly, and Mester are on the calendar to deliver speeches. The talk of consecutive rate hikes in July and September would test buyer appetite.

The US Jobs Report had a limited impact on sentiment toward the Fed policy outlook despite the nonfarm payroll numbers. Fed chatter could shift market sentiment before the US CPI Report on Wednesday.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 93.0% versus 86.8% one week earlier. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 24.2%, up from 20.8% one week earlier.

China Inflation Sets the Tone

In June, China registered zero inflation, with consumer prices falling by 0.2% in June. Economists forecast consumer prices to remain unchanged and for the annual inflation rate to hold steady at 0.2%.

Significantly, the Producer Price Index garnered more interest as investors fret over the economic outlook. In June, the PPI fell by 5.4% year-over-year versus a 4.6% decline in May. Economists forecast a 5.0% decline, signaling a deteriorating demand environment.

GBP to USD Price Action

This morning, the GBP to USD was down 0.10% to $1.28251.

Daily Chart

The Daily Chart showed the GBP to USD sit above the $1.2775 – $1.2800 resistance band. Looking at the EMAs, the GBP to USD remained above the 50-day ($1.25937) and 200-day ($1.23495) EMAs, signaling bullish momentum over the near and long term.

Notably, the 50-day EMA continued to pull away from the 200-day EMA and reflected a bullish trend.

Looking at the 14-Daily RSI, the 64.39 reading signals a bullish trend, aligned with the 50-day and 200-day EMAs. A GBP to USD hold above the upper level of the $1.2775 – $1.2800 resistance band would support a run at $1.30.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD faces strong resistance at the $1.2850 psychological level. After the bullish Friday, the GBP to USD sits above the 50-day ($1.27262) and 200-day ($1.26341) EMAs, sending bullish signals. Significantly, the 50-day EMA pulled further away from the 200-day EMA, signaling a hold above the $1.2775 – $1.2800 resistance band and a run at $1.30.

However, the GBP to USD must hold above the $1.2775 – $1.2800 resistance band to support a sustained run at $1.30.

The 14-4H RSI reading of 68.14 delivered a bullish signal, with buying pressure outweighing selling pressure. Significantly, the RSI aligns with the EMAs and signals a run at $1.30.