GBP/USD Price Analysis – Dec 16, 2024

Daily Price Outlook

During the European trading session, the GBP/USD pair climbed to around 1.2647, briefly reaching an intraday high of 1.2671.

This upward movement was driven by the release of the UK’s flash S&P Global/CIPS Purchasing Managers’ Index (PMI) data.

The report revealed that overall business activity in the UK expanded modestly, with the PMI rising to 50.5. Meanwhile, the US dollar weakened, turning bearish ahead of key monetary policy meetings this week.

Moving ahead, Federal Reserve is set to meet on Wednesday, followed by the Bank of England on Thursday, adding to market anticipation and influencing the currency pair's performance.

GBP/USD Volatility Set to Increase Ahead of Fed and BoE Meetings Amid Mixed UK PMI Data

On the BoE front, the release of the UK’s flash S&P Global/CIPS PMI data offered mixed signals. Overall business activity expanded at a steady pace, with the PMI rising to 50.5.

However, the manufacturing sector showed a faster-than-expected contraction, with its PMI dropping to 47.3 from 48.0 in November, against forecasts of 48.1.

On the other hand, the services sector grew more robustly, with its PMI climbing to 51.4, beating expectations of 51.0 and the previous month’s 50.8.

Despite this moderate growth, businesses remain cautious due to fragile consumer confidence, tighter budgets, and cutbacks in non-essential spending.

The report also revealed a decline in staffing for the third straight month, partly due to upcoming increases in National Insurance contributions.

Meanwhile, the Pound Sterling gained strength against the US Dollar, which remained subdued with the US Dollar Index (DXY) around 107.00.

Investors are bracing for volatility in the GBP/USD pair this week as both the Federal Reserve (Fed) and the Bank of England (BoE) are set for their final policy meetings of the year.

The Fed is expected to reduce interest rates by 25 basis points to 4.25%-4.50%, while the BoE is likely to keep its rates unchanged at 4.75%.

However, with these rate decisions largely priced in, market attention is shifting toward the outlook for 2025, where traders anticipate three rate cuts from both central banks.

In addition to the central bank meetings, UK economic data will also influence the Pound this week. Employment figures for the three months ending in October and the Consumer Price Index (CPI) data for November will be released on Tuesday and Wednesday.

Any significant deviation from expected numbers could influence market expectations for the BoE’s future actions and its policy stance for 2025.

(GBP/USD) – Technical Analysis

The GBP/USD pair is trading at $1.26392, up 0.24%, as buyers extend gains above the pivot point of $1.26160. The immediate resistance sits at $1.26725, where a break higher could open the door to further upside, targeting resistance levels at $1.27194 and $1.27860.

Market sentiment remains cautiously optimistic, with the pound benefiting from renewed risk appetite and technical buying momentum.

On the downside, immediate support is seen at $1.25679, followed by further levels at $1.25239 and $1.24866, which could attract dip-buyers if the pair retraces.

Despite the current uptick, the 50-day EMA at $1.27096 looms overhead as a key hurdle for bullish continuation, and any failure to breach this resistance could trigger a pullback.

The Relative Strength Index (RSI) stands at 40, signaling mild bearish pressure but also leaving room for a potential recovery.

The technical setup suggests cautious buying above the pivot point at $1.26160, with a target of $1.26742 and a stop loss at $1.25862 to manage downside risks.

In conclusion, the GBP/USD remains in a consolidative phase, but the short-term bias tilts bullish above $1.26160.

A sustained push above $1.26725 would reinforce upward momentum, while failure to hold the pivot could expose the pair to further selling pressure.

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