GBP/USD Price Analysis – Dec 04, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair struggled to recover and stayed bearish around 1.2671, briefly touching an intra-day low of 1.2630.
This downward momentum was primarily driven by the strength of the US Dollar, which gained traction as investors remained focused on upcoming US Nonfarm Payrolls (NFP) data due Friday.
The anticipation of this report has heightened market expectations about the Federal Reserve’s policy direction. With the Fed initiating a policy-easing cycle in September due to concerns over slowing labor demand, confidence remains strong that inflation will stay on track toward the 2% target.
Meanwhile, the Pound Sterling faced additional pressure after Bank of England (BoE) Governor Andrew Bailey hinted at potential interest rate cuts in 2025, forecasting four reductions as he expects the disinflation trend to solidify.
This dovish outlook has dampened the Pound’s appeal against its major peers, including the US Dollar. As a result, the GBP/USD pair experienced volatility, reflecting uncertainty in market sentiment.
US Economic Data and Fed Insights Weigh on GBP as Market Awaits Key Releases
On the US front, the Pound Sterling remained under pressure mainly due to the strengthening US Dollar, supported by rising investor confidence ahead of key economic data releases.
The Pound’s appeal was further weighed down by cautious market sentiment, especially after recent remarks by Bank of England Governor Andrew Bailey, who hinted at potential rate cuts in 2025.
Meanwhile, attention is turning toward US Nonfarm Payrolls (NFP) data, set to be released on Friday.
This report is crucial as the Federal Reserve has already begun a policy-easing cycle, driven by concerns over slowing labor demand. Markets remain optimistic that inflation will stay on course toward the Fed’s 2% target.
On Wednesday, all eyes are on Fed Chair Jerome Powell’s speech at the New York Times DealBook Summit, where investors hope to gain fresh insights into the Fed’s interest rate plans. Current market expectations suggest a 74% chance of a rate cut to 4.25%-4.50% in the coming months.
Economic data releases on Wednesday, including the US ADP Employment Change and ISM Services PMI, are also key focal points. Analysts predict the US private sector added 150K jobs in November, a notable drop from October’s 233K.
The ISM Services PMI is expected to ease slightly to 55.5 from 56.0, signaling a slower pace of growth but still reflecting an expanding economy. These figures will provide further clues about the state of the US economy and the potential direction of Federal Reserve policy.
Pound Sterling Pressured as BoE Signals Future Rate Cuts Amid Persistent Inflation Concerns
On the GBP front, the Pound Sterling faced selling pressure on Wednesday after Bank of England (BoE) Governor Andrew Bailey predicted four interest-rate cuts in 2025 during an interview.
He highlighted the need to reduce rates gradually while emphasizing that more effort is needed to bring inflation down, even though the disinflation process is already underway.
When asked about the potential impact of US tariffs under President-elect Donald Trump on UK inflation, Bailey said the effects are challenging to predict.
Bailey did not provide any clear signals about the BoE’s next move at its upcoming monetary policy meeting on December 19. However, traders widely expect the central bank to keep interest rates steady at 4.75%.
This expectation is driven by concerns over the persistence of UK inflation, which remains a key focus for policymakers.
Meanwhile, the UK’s October inflation report showed that core inflation, excluding volatile items, rose to 3.3%, while services inflation climbed to 5%.
The BoE closely monitors services inflation as it reflects underlying price pressures in the economy. These figures have added to the cautious sentiment, making it likely that the BoE will hold off on any immediate rate changes.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.26866, up 0.11%, maintaining a mildly bullish tone as it hovers just above its 50-day EMA at $1.26799. The pair is consolidating below its pivot point of $1.27106, with immediate resistance at $1.27496.
Further resistance levels are noted at $1.27833, suggesting potential upside targets if the pair sustains momentum. On the downside, support is seen at $1.26169, followed by $1.25817 and $1.25386.
The RSI stands at 53, reflecting modest bullish momentum but not yet signaling overbought conditions. A decisive move above the pivot point could validate the bullish bias, targeting $1.27496 and beyond.
However, a break below $1.26645 may expose the pair to further declines, targeting the $1.26169 support zone.
Entry opportunities above $1.26645 align with the current trend, with profit targets near $1.27098 and a prudent stop-loss at $1.26323 to manage downside risks.
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