GBP/USD Price Analysis – Dec 02, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair fell, slipping below the 1.2700 mark, as the US Dollar gained strength following President-elect Donald Trump's threats against the BRICS trading bloc.
Trump announced that he would impose 100% tariffs on BRICS countries if they tried to create a new currency to replace the US Dollar. This threat added strength to the US Dollar, further supporting the Greenback’s position.
US Dollar Strengthened by Trump's Stance Against BRICS
Donald Trump's comments on social media sparked concerns about trade tensions. He criticized the BRICS nations' plan to create a new currency that could challenge the US Dollar's dominance in global trade.
Trump said that these countries must promise not to create a new currency or back any other currency to replace the US Dollar, or they would face 100% tariffs.
His strong statement helped strengthen the US Dollar, which put pressure on the GBP/USD pair. The threat of tariffs made investors more cautious, supporting the Greenback while causing the Pound to weaken.
Pound Sterling Finds Support in UK Housing Data
Despite the initial decline, the cable currency regained some ground after the release of Nationwide Housing Price data, which showed a year-over-year rise of 3.7% in November, beating expectations of 2.4%.
On a seasonally adjusted basis, housing prices increased by 1.2% month-over-month, significantly higher than the forecasted 0.2% growth.
Therefore, the data offered temporary relief to the Pound as it highlighted underlying resilience in the UK housing market.
Interest Rate Cuts Expected from BoE and Fed: Impact on GBP/USD
Investors are closely watching interest rate decisions from both the Bank of England (BoE) and the US Federal Reserve (Fed), as these are major drivers of currency valuations.
Both central banks are expected to cut interest rates at their December meetings, with inflation easing in both the UK and the US.
The swaps market suggests a 60% chance of a 0.25% rate cut by the BoE, while the CME FedWatch tool shows a 67% probability of a similar cut by the Fed.
Therefore, the lower interest rates can make a currency less attractive to investors since they reduce returns on investments, which can lead to lower foreign capital inflows.
As a result, the Pound and US Dollar may face downward pressure, limiting volatility in the GBP/USD pair.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.2692, showing cautious consolidation near the pivot point at $1.26758. The pair reflects indecision, with price movement closely aligned to key technical levels.
Immediate resistance stands at $1.27486, followed by $1.28086 and $1.28575. A breakout above $1.27486 could attract further bullish momentum, supported by the 50-day EMA at $1.26473, which reinforces underlying support.
On the downside, immediate support is identified at $1.26175, with further critical levels at $1.25669 and $1.25072. The Relative Strength Index (RSI) is neutral at 50, indicating a balance between bullish and bearish forces. A sustained move below $1.26758 could drive prices toward $1.26175 and signal a broader bearish sentiment.
While the broader trend remains uncertain, the pair's proximity to its pivot point suggests a critical juncture. Bulls must reclaim $1.27486 for a potential rally, while failure to hold above $1.26758 may lead to downside risks.
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