GBP/USD Price Analysis – Dec 23, 2024
Daily Price Outlook
During the European trading session, the GBP/USD currency pair started the week on a quiet note, moving in a narrow range just above the mid-1.2500s.
However, the US Dollar had pulled back from a two-year high last Friday, following the release of the Personal Consumption Expenditure (PCE) Price Index for November. The report showed signs of inflation easing, but also highlighted ongoing economic struggles.
However, there are still factors working in favor of the USD. The Federal Reserve's recent hawkish stance continues to support the greenback, as markets anticipate further tightening. This keeps the safe-haven USD in demand, limiting any significant gains for the GBP.
On the other hand, the British Pound faces its own challenges. The Bank of England's (BoE) recent decision to leave interest rates unchanged, along with a more dovish outlook, has created a sense of caution in the markets.
The BoE’s split vote shows a lack of consensus among policymakers, which leaves traders hesitant to make aggressive bullish bets on the GBP.
As a result, the pair's movement remains restrained, with neither the USD nor GBP dominating the direction in the early hours of the week.
USD Remains Supported by Hawkish Fed and Global Tensions, Capping GBP/USD Gains
On the US front, the broad-based US Dollar (USD) eased from its two-year high on Friday after the November Personal Consumption Expenditure (PCE) Price Index hinted at slowing inflation and ongoing economic challenges.
This has kept USD buyers cautious, giving some support to the GBP/USD pair. However, the Federal Reserve’s (Fed) hawkish outlook still favors the USD.
While the Fed recently lowered interest rates by 25 basis points (bps), it signaled a slower pace of rate cuts in 2025.
This, along with strong US Treasury yields and global tensions from the Russia-Ukraine conflict and Middle East unrest, could attract USD buyers and limit the GBP/USD pair's gains.
Traders now await key events for further direction, including the Bank of England’s (BoE) Quarterly Bulletin and the US Consumer Confidence Index later today.
The market mood remains cautious, as the BoE’s less aggressive stance on interest rates and global uncertainties weigh on the British Pound.
Given the mixed signals from both currencies, it’s wise to wait for clear and sustained buying interest before confirming whether the GBP/USD pair has hit a bottom in the short term.
GBP/USD Under Pressure Amid BoE's Dovish Tone and Economic Downgrade
On the GBP front, the British Pound faces pressure after the Bank of England (BoE) decided to keep interest rates unchanged last week.
The decision revealed a split vote among policymakers, with three members of the Monetary Policy Committee (MPC) voting to cut rates. This lack of agreement has added to the uncertainty surrounding the BoE's future policy direction.
Moreover, the central bank downgraded its economic forecast for the final quarter of 2024, signaling potential challenges ahead for the UK economy.
These developments make traders cautious about betting on strong gains for the GBP. The BoE's dovish tone, combined with concerns about slower growth, is likely to limit the upside for the GBP/USD pair.
This cautious outlook keeps the GBP/USD pair under pressure, with further movements likely dependent on broader market factors and key economic data.
GBP/USD – Technical Analysis
GBP/USD is trading at $1.25689, up 0.04%, as the pair consolidates below the $1.26021 pivot point, reflecting a cautious tone.
The pair faces immediate resistance at $1.26620, with higher barriers at $1.27292 and $1.27819, signaling a challenging path for bulls amid a neutral market sentiment.
The 50 EMA at $1.26110 hovers above the current price, adding to downward pressure, while the RSI at 50 highlights indecision in momentum.
On the downside, immediate support lies at $1.25375, with additional levels at $1.24764 and $1.24237, reinforcing a bearish bias if these levels are breached.
The broader trend remains under pressure as the pair struggles to maintain gains above the pivot. The technical setup favors sellers, with the current price action suggesting a potential downside toward the $1.25029 take-profit target, especially if the pair fails to overcome the $1.26021 pivot point.
However, a decisive break above $1.26620 could shift momentum, opening the door to further gains.
Sell-limit orders below $1.25819 are preferred, with a target of $1.25029 and a stop-loss at $1.26415. Key resistance above $1.26620 needs monitoring for a potential reversal.
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