GBP/USD Forecast: BoE’s Pill vs. Fed’s Powell – Impact on Sterling

Highlights

• The GBP/USD declined by 0.13% on Wednesday, ending the session at $1.22839.
• Bank of England Governor Andrew Bailey discussed the need for restrictive policy.
• On Thursday, Bank of England Chief Economist Huw Pill and Fed Chair Jerome Powell will be in focus.

The Wednesday GBP/USD Overview

On Wednesday, the GBP/USD declined by 0.13%. Following a 0.35% loss on Tuesday, the GBP/USD ended the day at $1.22839. The GBP/USD rose to a high of $1.23013 before falling to a low of $1.22417.

Bank of England Chief Economist Huw Pill in the Spotlight

On Thursday, the Bank of England remains in focus. Bank of England Chief Economist Huw Pill is on the calendar to speak today. References to the economy, inflation, and monetary policy will influence the appetite for the Pound.

On Monday, Huw Pill considered an August interest rate cut as reasonable. Pill’s comments contrast with the views of Bank of England Governor Andrew Bailey. On Wednesday, the BoE Governor discussed needing restrictive monetary policy to bring inflation to target.

Uncertainty about the economic outlook likely contributed to the contrasting views. Investors may have to wait for UK GDP numbers on Friday to gauge the interest rate outlook. Dire numbers would support the BoE Chief Economist’s more dovish outlook on interest rates.

There are no UK economic indicators to influence investor sentiment on Thursday.

US Jobless Claims and Fed Chair Jerome Powell in Focus

On Thursday, US initial jobless claims will draw investor interest. An unexpected spike in claims could support bets on the Fed ending its rate hike cycle. Economists forecast initial jobless claims to rise from 217k to 218k in the week ending November 4.

A deteriorating labor market could impact consumer sentiment and wage growth, affecting consumer spending. A downward trend in consumer spending could ease demand-driven inflationary pressures and the need for a hawkish Fed rate path.

However, sticky inflation remains a bugbear for the Fed. Fed Chair Powell could provide a Fed view on interest rate goals on Thursday.

Recent labor market reports, including unit labor costs and the Jobs Report, signaled a weaker labor market. An affirmation that labor market conditions have softened sufficiently to support price stability could impact the appetite for the US dollar. During the FOMC press conference, Fed Chair Powell discussed the need for softer labor market conditions.

Short-Term Forecast

Before the UK GDP numbers on Friday, BoE and Fed speeches will remain the focal points. Amid the weakening UK economic backdrop, a hawkish Fed could send the GBP/USD toward $1.2150. However, better-than-expected GDP numbers could shift sentiment toward the Pound.

GBP to USD Price Action

Daily Chart

The GBP/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

A GBP/USD move through the 50-day EMA would give the bulls a run at the 200-day EMA and $1.24410 resistance level.

BoE Chief Economist Huw Pill and Fed Chair Jerome Powell will be the focal points on Thursday.

However, a drop below $1.22000 would bring the $1.21216 support level into play.

The 14-period daily RSI reading of 53.33 indicates a GBP/USD move to the $1.24410 resistance level before entering overbought territory.

4-Hourly Chart

The GBP/USD holds above the 50-day and 200-day EMAs, sending bullish price signals.

A GBP/USD move to $1.23 would give the bulls a run at the $1.24410 resistance level.

However, a fall through the 50-day and 200-day EMAs would give the bears a run at the $1.21216 support level.

The 14-period RSI on the 4-hour chart, 49.86, suggests a GBP/USD fall to the $1.21216 support level before entering oversold territory.