GBP to USD Forecasts: BoE/Ipsos Inflation Survey Could Test $1.2350

It is another quiet day for the GBP/USD. There are no UK economic indicators to provide the Pound with direction today.

The lack of stats will leave the GBP/USD in the hands of market risk sentiment early in the session.

This morning, inflation figures from China will set the tone. The markets will look for softer inflation to ease pressure on central banks.

However, later in the day, UK inflation expectations and US economic indicators will likely have more influence as investors shift focus to next week’s stats and the Fed and BoE monetary policy decisions.

With the markets anticipating 50-basis point rate hikes for the Fed and the BoE, we expect increased sensitivity to economic indicators in the lead-up to the respective policy decisions.

Ahead of the US stats, the Bank of England will release the Bank of England/Ipsos Inflation Attitudes Survey. With no Bank of England Monetary Policy Member speeches for the markets to consider, the survey will influence.

GBP/USD Price Action

At the time of writing, the Pound was down 0.03% to $1.22318. A bearish start to the day saw the GBP/USD fall to a low of $1.22232 before steadying.

Technical Indicators

The Pound needs to avoid the $1.2213 pivot to target the First Major Resistance Level (R1) at $1.2271. Risk-on sentiment and expectations of a pickup in inflation would support a breakout from the Thursday high of $1.22474 to signal a bullish session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2305. The Third Major Resistance Level (R3) sits at $1.2398.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2178 into play. However, barring an inflation-fueled sell-off, the GBP/USD should avoid sub-$1.2150 and the Second Major Support Level (S2) at $1.2120.

The Third Major Support Level (S3) sits at $1.2027.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.21515. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2178) and the 50-day EMA ($1.21515) would support a move through R1 ($1.2271) to target R2 ($1.2305). However, a GBP/USD fall through S1 ($1.2178) and the 50-day EMA ($1.21515) would bring S2 (1.2120) into view. The 200-day EMA sits at $1.18579.

The US Session

It is a busy session, with wholesale inflation and consumer sentiment figures in focus. While we have seen increased sensitivity to the consumer sentiment report, wholesale inflation figures should garner more interest.

With the Fed delivering its final policy decision of the year on Wednesday and the November CPI report on Tuesday, a better-than-expected annual wholesale rate of inflation figure could raise more question marks over a Fed pivot. Economists forecast the US wholesale inflation rate to soften from 8.0% to 7.2%.

No FOMC members will speak today. The Fed entered the blackout period last Sunday.