GBP/USD Price Analysis – Nov 13, 2024

Daily Price Outlook

During the European trading session, the GBP/USD currency pair extended its downward trend, despite mild declines in the US dollar. Currently, the pair is trading around the 1.2740 level, having dipped to an intraday low of 1.2729.

However, this downward pressure was driven by investor cautious sentiment ahead of the release of the US Consumer Price Index (CPI) data for October, scheduled for 13:30 GMT.

Furthermore, the disappointing UK labor market figures for the three months ending in September showed an unexpected rise in the unemployment rate to 4.3%. Meanwhile, the fresh payrolls were much lower than expected, with only 219K jobs added, compared to the 373K increase in the previous period ending in August. This was seen as another key factor that kept the GBP/USD pair down.

GBP/USD Pressure Mounts Amid Weak UK Labor Market Data and Inflation Concerns

On the data front, the United Kingdom (UK) labor market data for the three months ending in September showed that the unemployment rate rose to 4.3%, higher than expected. This caused the Pound to drop sharply.

Moreover, the number of new jobs added was lower than anticipated, with only 219K compared to 373K in the previous three-month period. Analysts at XTB suggest that the rise in unemployment could lead the market to expect a higher chance of a rate cut by the Bank of England (BoE) next month.

Although the labor market data wasn't all negative for the Pound, average earnings, which reflect wage growth and are important for consumer spending, came in higher than expected. This helped ease some of the concerns. Following the data, Bank of England Chief Economist Huw Pill raised concerns about inflation remaining high.

He noted that pay growth is still strong, which, combined with the UK’s productivity outlook, makes it difficult to meet the BoE’s inflation target. Pill's comments suggest that the central bank remains cautious about inflation, even as other parts of the economy show signs of slowing down.

Therefore, the weak UK labor market data and concerns over inflation led to a decline in the GBP, putting pressure on the GBP/USD pair. The market's expectation of a potential rate cut from the Bank of England further weighed on the Pound.

US Dollar Holds Firm Ahead of CPI Data, Pressuring GBP/USD Pair

On the US front, the broad-based US dollar is losing some momentum but continues to hold onto gains, with the US Dollar Index (DXY) at around 106.00, its highest level in over six months. Investors are focused on the upcoming release of the US Consumer Price Index (CPI) data for October, scheduled for 13:30 GMT.

Economists expect the headline inflation to rise to 2.6% from 2.4% in September, while core CPI, which excludes food and energy prices, is predicted to increase by 3.3%. Monthly, the headline CPI is expected to rise by 0.2%, and core CPI by 0.3%.

Although inflation is expected to show a slight increase, it likely won’t change the market’s view on the Federal Reserve’s (Fed) policy for December unless the numbers are significantly different from expectations. Most Fed officials are confident that inflation is moving towards their 2% target.

However, Minneapolis Fed President Neel Kashkari mentioned that if inflation rises unexpectedly before December, it could cause the Fed to reconsider its approach. The probability of the Fed reducing interest rates in December is now 62%, slightly lower than the 70% probability seen a week ago, according to the CME FedWatch tool.

Therefore, the US dollar’s steady strength, coupled with expectations for slightly higher inflation, is likely to keep pressure on the GBP/USD pair. If the CPI data aligns with expectations, it may reinforce the US dollar's dominance, limiting any potential recovery for the Pound.

GBP/USD – Technical Analysis

The GBP/USD pair is trading at $1.27385, down 0.07% on the day, indicating a slight bearish tilt as the British pound remains under pressure against the U.S. dollar.

The pivot point for GBP/USD is at $1.27823, a critical level for gauging market direction in the near term. A sustained move above this point could signal a bullish shift, though immediate resistance at $1.28321 and further resistance at $1.28694 may limit any substantial recovery.

On the downside, immediate support sits at $1.27201, followed by stronger support levels at $1.26869 and $1.26529. A breach below these levels could accelerate bearish momentum, especially if the dollar continues to strengthen.

The Relative Strength Index (RSI) currently stands at 26, indicating an oversold condition and suggesting potential for a technical rebound if support holds. However, the 50-day Exponential Moving Average (EMA) at $1.28799 is notably above the current price, reinforcing the pair’s bearish bias. Traders may interpret this distance from the 50 EMA as a sign of sustained downward pressure unless a significant recovery occurs.

With GBP/USD hovering near oversold territory, a potential buy entry above $1.27201 may provide an opportunity for a short-term rebound, targeting $1.27858. A stop-loss at $1.26811 is advisable to manage risk, given the current bearish sentiment.

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