GBP to USD Forecasts: Bulls Target $1.30 on UK Wages and BoE Talk

Highlights

• The GBP to USD had a bullish start to the session, with Fed commentary providing early support.
• It is a busy day on the UK economic calendar. The May Labour Market Overview Report will move the dial.
• However, central bank commentary will also influence, with BoE and Fed speakers in focus.

It is a busy day ahead for the GBP to USD. The UK Labour Market Overview Report will garner interest today. While unemployment figures will influence, UK wage growth remains a Bank of England bugbear.

An acceleration in wage growth would force the Bank of England to keep its foot on the gas to tame inflation. Economists forecast average earnings, including bonuses, to increase by 6.8% in May versus 6.5% in April and for the unemployment rate to hold steady at 3.8%.

With the UK Labour Market Overview in the spotlight, investors should monitor Bank of England chatter. However, no Monetary Policy Committee members are on the calendar to speak today, leaving commentary with the media to influence.

On Monday, Bank of England Governor Andrew Bailey spoke at the Financial and Professional Services Dinner. The BoE Governor vowed to see the job through on taming inflation, saying,

“It is crucial that we see the job through, meet our mandate to return inflation to its 2% target, and provide the environment of price stability in which the UK economy can thrive.”

The US Session

It is a quiet day on the US economic calendar, with no US economic indicators to provide direction. The quiet economic calendar will leave FOMC member commentary in focus, with FOMC member Bullard on the calendar to speak today.

FOMC members Barr, Bostic, and Daly weighed on the dollar, announcing the Fed monetary policy tightening cycle is nearing its end.

FOMC Member Mary Daly reportedly favored two further rate hikes this year but added,

“While the risks of doing too little are still greater than those of overdoing it on rate hikes, the two sides are getting into better balance as the Fed nears the last part of its hiking cycle.”

FOMC member Michael Barr noted that he thinks the Fed is close, with Raphael Bostic erring on the side of patience.

According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike was 92.4% versus 93.0% on Friday. Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 23.1%, down from 24.2% on Friday.

GBP to USD Price Action

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 ($1.26060) and 200-day ($1.23551) 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 67.88 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. The GBP to USD would need to break down resistance at $1.29 to bring $1.30 into view, last struck in April 2022.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD faces strong resistance at the $1.29 psychological level. After the bullish Monday, the GBP to USD remains above the 50-day ($1.27498) and 200-day ($1.26458) 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 66.42 delivered a bullish signal, with buying pressure outweighing selling pressure. Significantly, the RSI aligns with the EMAs and signals a run at $1.30.