GBP to USD Forecasts: Bulls Eye $1.2050 on UK GDP and US Job Reports

It is a busy day ahead for the GBP/USD. Following a quiet Monday to Thursday, the UK GDP Report for January will be in focus.

The British Chamber of Commerce (BCC) released its 2023 UK economic forecasts on Wednesday. An upward revision to the 2023 economic forecast supported the GBP/USD.

The BCC projected the UK economy to contract by 0.3% in 2023, up from 1.3%. Significantly, the BCC also projected growth in the final two quarters of 2023, meaning the UK economy would avoid a recession.

The UK GDP Report needs to support the more optimistic BCC economic outlook. We expect the GDP and manufacturing production figures to draw more interest. Following an agreement on the Ireland Protocol, the markets will likely brush aside the trade data, with trade terms in Q2 likely to have more weighting.

Economists forecast the UK economy to expand by 0.1% in January but stall in the three months to January. While avoiding a contraction would be GBP/USD positive, industrial and manufacturing production numbers would need to beat expectations. Economists forecast manufacturing and industrial production to decline by 0.1%.

With economic data on the heavier side, investors should also consider Bank of England Monetary Policy Committee Member speeches. However, no Monetary Policy Committee Members are on the calendar to speak, leaving investors to monitor chatter with the media.

GBP/USD Price Action

This morning, the GBP/USD was up 0.07% to $1.19282. A mixed start to the day saw the GBP/USD rise to an early high of $1.19331 before falling to a low of $1.19070.

Technical Indicators

The Pound needs to avoid the $1.1896 pivot to target the First Major Resistance Level (R1) at $1.1963. A move through the Thursday high of $1.19389 would signal an extended breakout session. However, the Pound would need the UK and US stats to support a breakout session.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2006. The Third Major Resistance Level sits at $1.2117.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1853 into play. However, barring a data-fueled sell-off, the GBP/USD should avoid sub-$1.1750. The second Major Support Level (S2) at $1.1785 should limit the downside. The Third Major Support Level (S3) sits at $1.1675.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.19494. The 50-day EMA eased back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A breakout from the 50-day EMA ($1.19494) and R1 ($1.1963) would give the bulls a run at R2 (1.2006). However, failure to move through the 50-day EMA ($1.19494) would leave the Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.

The US Session

Looking ahead to the US session, it is a big day on the US economic calendar. The heavily anticipated US Jobs Report will be the key driver. Another jump in nonfarm payrolls would likely cement a 50-basis point interest rate hike in March and raise bets of another hawkish move in April.

Following Fed Chair Powell’s hawkish testimony and the mid-week labor market numbers, investors should also monitor FOMC member commentary. Hawkish chatter and another spike in hiring would deliver another GBP/USD tumble.