GBP to USD Forecasts: Bears Eye $1.2650 on Economic Growth Angst

It is a busy day ahead for the GBP to USD. UK retail sales for May and prelim private sector PMI numbers for June will be in focus.

After the surprise Bank of England interest rate hike on Thursday, bullish PMI numbers and a jump in retail sales could fuel bets of more to come.

While the manufacturing PMI will influence, we expect the services PMI to garner more interest. However, investors should look beyond the headline numbers, with employment, new orders, and inflation being the likely focal points.

A pickup in service sector activity and a fall in retail should ease pressure on the BoE.

Investors should monitor Bank of England commentary. However, no Monetary Policy Committee members on the calendar to speak, leaving chatter with the media to move the dial.

Earlier today, the UK GfK Consumer Confidence Index increased from -27 to -24. However, risk-off sentiment overshadowed the modest pickup in confidence. Growth jitters weighed on riskier assets and the GBP to USD.

GBP to USD Price Action

This morning, the GBP/USD was down 0.30% to $1.27093. A bearish start to the day saw the GBP to USD fall from an early high of $1.27498 to a low of $1.27072.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The GBP/USD sat above the 100-day EMA, currently at $1.26382. The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A move through the 50-day EMA ($1.27110) would support a breakout from R1 ($1.2817) to target R2 ($1.2887) and $1.29. A surprise rise in retail sales and a pickup in service sector activity would support a bullish session. However, a fall through S1 ($1.2702) would bring S2 ($1.2656) and the 100-day EMA ($1.26382) into view. A move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar.

Prelim US private sector PMIs will also move the dial. We expect the services PMI to garner greater interest. However, investors should look beyond the headline figures, with employment, new orders, and inflation as the focal points.

Beyond the numbers, FOMC members will also need monitoring. FOMC members Bullard and Bostic are on the calendar to speak today.

After Fed Chair Powell’s two days of testimony, there was little change in Fed rate hike bets.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Thursday versus 74.4% on Wednesday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 11.9% to 13.8%.