GBP to USD Forecasts: Hot US Inflation Number to Deliver Sub-$1.1950

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators for the markets to consider today.

Through the early part of the day, the lack of stats will likely leave the GBP/USD in the hands of market risk sentiment. On Thursday, US jobless claims beat forecasts, supporting the hawkish Fed interest rate path and policy divergence in favor of the dollar.

With no stats to change the narrative, Bank of England Monetary Policy Committee members would need to deliver hawkish commentary to converge sentiment toward Fed and BoE policy.

Following Thursday’s Q3 GDP numbers and the recent MPC warning that the UK is facing its lengthiest recession on record, the GBP/USD faces the prospect of further losses. However, with no MPC members due to speak, US economic indicators would need to disappoint to support the GBP/USD.

GBP/USD Price Action

At the time of writing, the Pound was up 0.07% to $1.20379. A mixed start to the day saw the GBP/USD fall to an early low of $1,20221 before rising to a high of $1.20419.

Technical Indicators

The Pound needs to move through the $1.2056 pivot to target the First Major Resistance Level (R1) at $1.2121 and the Thursday high of $1.21474. A return to $1.21 would signal a bullish session. However, the Pound would need a risk-on session and softer US inflation numbers to support a breakout.

In the case of an extended rally, the GBP/USD would likely test resistance at $1.2150 but fall short of the Second Major Resistance Level at $1.2212. The Third Major Resistance Level (R3) sits at $1.2368.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1965 in play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.19. The Second Major Support Level (S2) at $1.1901 should limit the downside.

The Third Major Support Level (S3) sits at $1.1745.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 100-day EMA, currently at $1.21455. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through R1 ($1.2121) and the 100-day EMA ($1.21455) would bring the 50-day EMA ($1.21621) and R2 ($1.2212) into play. However, failure to move through the 100-day EMA ($1.21455) would bring S1 ($1.1965) and sub-$1.1950 into view. The 200-day EMA sits at $1.20150.

The US Session

It is a busy day ahead, with inflation, personal spending, durable goods orders, and consumer sentiment numbers due out. The inflation and the spending figures should have the most influence. However, investors will need to look out for any revisions to the Michigan Inflation Expectations Index.

Last week, the hawkish Fed rate hike and FOMC economic projections created uncertainty toward Fed monetary policy. Today’s inflation and personal spending figures could provide the markets with clarity.

Economists forecast weaker personal spending and softer inflation, which would be DXY negative and GBP/USD positive.

The markets will also need to consider FOMC member chatter, which could have more impact than the stats.