GBP/USD Price Analysis – Dec 11, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair struggled to halt its bearish trend and stayed under pressure around 1.2725, hitting an intraday low of 1.2713.
The decline was mainly driven by the stronger US Dollar, which gained support ahead of the release of the US Consumer Price Index (CPI) data for November, scheduled at 13:30 GMT.
Investors are keenly watching this report as it could influence expectations for the Federal Reserve’s future interest rate decisions.
Meanwhile, the British Pound faced additional challenges due to a lack of significant economic events in the UK. With a relatively quiet economic calendar, the focus has shifted to the Bank of England’s upcoming policy meeting on December 19.
Market participants are speculating on whether the BoE will maintain its current stance or take further action on interest rates.
Until then, the Pound is likely to remain under pressure, especially as it struggles to find clear direction against major currencies like the Euro and US Dollar.
US Dollar Strengthened by CPI Data and Fed Rate Cut Expectations, Impact on GBP/USD
On the US front, the broad-based US dollar maintained its upward trend as investors awaited the release of the November Consumer Price Index (CPI) data, scheduled for 13:30 GMT.
The inflation report is expected to show that the annual headline CPI increased slightly to 2.7% from the previous 2.6%.
The core CPI, which excludes food and energy prices, is forecasted to rise steadily by 3.3%. On a monthly basis, both the headline and core CPI are expected to grow by 0.3%.
This inflation data is unlikely to change the Federal Reserve's interest rate plans for the meeting on December 18, unless the numbers differ significantly from expectations.
According to a recent Reuters poll, 90% of economists believe the Fed will cut interest rates by 25 basis points next week.
The poll also suggests that most economists expect the Fed to pause any further rate cuts starting in January 2025, assuming that US President-elect Donald Trump's policies, such as higher import tariffs and tax cuts, could lead to higher inflation.
Therefore, the expected CPI data and the Fed's likely interest rate cut may support the US dollar, potentially keeping the GBP/USD pair under pressure. If inflation figures align with expectations, the pair could remain in a consolidative range until further clarity.
BoE Rate Decision and Economic Data to Drive Market Sentiment
On the GBP front, the Pound Sterling is struggling to find direction against other major currencies due to a quiet UK economic calendar.
As a result, the British currency's movement will largely depend on market expectations for the Bank of England’s (BoE) interest rate decision on December 19.
Traders expect the BoE to keep interest rates unchanged at 4.75% next week as inflationary pressures persist.
However, upcoming economic data, such as the UK’s employment report for the three months ending in October and the November Consumer Price Index (CPI), could influence the BoE's future rate decisions.
At the same time, concerns about the UK labor market could lead the BoE to adopt a more cautious stance.
A recent survey showed that employment growth expectations for the next year have dropped to a four-year low.
Later this week, investors will focus on the UK’s monthly Gross Domestic Product (GDP) and Industrial Production data for October.
These reports will provide a clearer picture of the UK economy’s health, with expectations of a recovery in both factory output and GDP after a decline in September. These indicators could further shape expectations for the BoE’s policy direction.
GBP/USD – Technical Analysis
The GBP/USD pair is trading at $1.27680, reflecting a 0.6% gain on the day and signaling moderate bullish momentum on the 4-hour chart. The pivot point at $1.27356 serves as a critical level, with prices attempting to hold above it.
Immediate resistance is situated at $1.27986, followed by $1.28322 and $1.28665. On the downside, immediate support lies at $1.26955, with additional support levels at $1.26546 and $1.26169.
Technical indicators provide mixed signals. The RSI is at 53, indicating a balanced market sentiment, neither overbought nor oversold. The 50 EMA, positioned at $1.27529, aligns with current price action, reinforcing the bullish bias as long as prices remain above this level.
A sustained move above $1.27986 could propel GBP/USD toward the next resistance at $1.28322, signaling continued buying interest.
Traders may consider a buy-limit strategy at $1.27362, targeting $1.27979, with a stop-loss at $1.26958. This approach capitalizes on the bullish trend while managing downside risk in the event of a reversal.
However, a break below the pivot point could invalidate this outlook, opening the door for further declines toward $1.26955 or lower support levels.
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