GBP to USD Forecasts: Bulls Eye $1.25 on UK GDP and US Inflation
It is a relatively busy day ahead for the GBP/USD. UK GDP numbers for Q4 will be in focus this morning. The latest round of UK economic indicators has eased fears of a UK recession and demonstrated resilience in the economy,
While we expect GBP/USD sensitivity to the GDP figures, responses to downward revisions would likely be short-lived. The GDP numbers are also unlikely to influence the Bank of England, which remains focused on inflation. Economists forecast the UK economy to stall in Q4, unchanged from prelim figures. In Q3 2022, the UK economy contracted by 0.2%.
With GDP numbers in focus, investors should track BoE member commentary. However, according to the calendar, no MPC members are delivering speeches today, leaving chatter with the media to influence.
Earlier today, better-than-expected PMI numbers from China set the mood. The NBS Manufacturing PMI slipped from 52.6 to 51.9, while the Non-Manufacturing PMI jumped from 56.3 to 58.2. Economists forecast PMIs of 51.5 and 54.3.
GBP/USD Price Action
This morning, the GBP/USD was up 0.14% to $1.24016. A mixed start to the day saw the GBP/USD fall to an early low of $1.23789 before rising to a high of $1.24232. The First Major Resistance Level (R1) at $1.2421 capped the upside.
The Pound needs to avoid the $1.2357 pivot to retarget the First Major Resistance Level (R1) at $1.2421 and the morning high of $1.24232. A return to $1.2420 would signal an extended breakout session. However, the Pound would need risk-on sentiment and weak US economic indicators 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 $1.2456 and resistance at $1.25. The Third Major Resistance Level sits at $1.2556.
A fall through the pivot would bring the First Major Support Level (S1) at $1.2321 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.23 and the second Major Support Level (S2) at $1.2257. The Third Major Support Level (S3) sits at $1.2158.
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 $1.22859. The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.
A hold above S1 ($1.2321) and the 50-day EMA ($1.22859) would support a breakout from R1 ($1.2421) to target R2 ($1.2456) and $1.25. However, a fall through S1 ($1.2321) would bring the 50-day EMA ($1.22859) and S2 ($1.22188) into view. A fall through the 50-day EMA would send a bearish signal.
The US Session
Looking ahead to the US session, it is a busier day on the US economic calendar. Core PCE Price Index, consumer sentiment, and personal spending/income figures will draw plenty of interest.
Barring an unexpected slide in personal spending, the Core PCE Price Index should influence the GBP/USD pair. Economists forecast the Core PCE Price Index to rise by 4.7% year-over-year in February. Hotter-than-expected inflation numbers would test the market expectation of a Fed interest rate pause in February.
Investors should also monitor Fed chatter on monetary policy and the US economy.