The British pound price enters the new week's trading with some positive technical momentum that makes it appear stronger against both the euro and the dollar currencies. Thus, the release of British inflation numbers in the middle of this week may represent a challenge to recent movements. For two days in a row, the price of the British pound against the US dollar, GBP/USD, was exposed to selling operations. As a result of which it moved towards the support level of 1.2628 after testing the resistance of 1.2795 last week, which is the highest for the currency pair in more than three months. Therefore, because of the monetary policy decisions of the global central banks last week, which It witnessed an exciting transformation for markets and investors.
Meanwhile, the forecast for the pound against the euro for this week's trading shows positive momentum in the short term due to the sharp rise on Friday that followed the release of better-than-expected UK PMI data, which showed that the British economy is likely to grow comfortably in December. On the other hand, Eurozone PMIs were disappointing and pointed to a contraction in the economy, which led to the pound rising to a high of 1.1668.
Commenting on the performance of the currency pair, analyst Bill McNamara at The Technical Trader says the currency pair is pointing higher in the near term: “Some near-term resistance is still possible at that previous peak, but if it gives in, a return to the 2023 high (at 1.1743) becomes a realistic expectation.” For his part, Nick Rees, forex market analyst at Monex Europe, says that the price of the pound sterling may now be on track to achieve Monex's end-of-year target of 1.17. Overall, those monitoring this forex exchange rate should realize that GBP-EUR has struggled to break above 1.17 on any meaningful basis in 2023, and we are wary of another failure to break above here.
In the same forecast, the forecast for GBP/USD exchange rate for this week appears bullish, thanks to the +1.5% rise that we witnessed last week, ensuring that the momentum board is green and calls for further gains. Therefore, sterling certainly suffered a setback on Friday after US Federal Reserve Board Member John Williams' comments injected a dose of reality into what has become a strong market response to the US Fed's mid-week interest rate decision and guidance update.
Furthermore, the pound is unlikely to suffer badly in the near term, and bearish buyers are likely to emerge as the Bank of England remains more hawkish against the Fed now. However, according to analysts a break below 1.27 opens support at 1.2670. Commenting on the performance of the sterling-dollar pair, Sean Osborne, chief forex analyst at Scotiabank, says that the balance of risks favors more gains for the pound sterling. Shortly, “The trend dynamics are strongly bullish across short-, medium- and long-term oscillators, and the British pound is expected to record a strong close during the week - all of which leads to trend risks clearly tilting towards further sterling gains and a push to the 1.2800 and 1.2880 resistance areas soon.” “.
GBPUSD Expectations and Analysis Today:
The GBP/USD exchange rates rise back above the 1.27 resistance comes after the US Federal Reserve's guidance last week effectively overlooked the market's bets for several interest rate cuts in 2024, with Fed Chairman Jerome Powell saying he was vigilant. Moreover, the risk of keeping interest rates tied for too long. Therefore, this pivot has affected the dollar more broadly and contrasts with the Bank of England's more “hawkish” tone.
Meanwhile, the pound received support from the Bank of England's latest policy decision and guidance, which saw the bank warn that inflation risks remain tilted to the upside. Thus, it cannot rule out further interest rate hikes once and for all. Overall, UK inflation data this week could support the latest supportive narrative for the pound if it reaches higher than expected levels. Moreover, if the data is lower than expected, we may see the British pound come under pressure during the mid-week session. On the US dollar front, all focus will be on the announcement of the Federal Reserve’s preferred US inflation reading. According to the performance on the daily chart below, breaking support 1.2530 will negatively affect the current upward rebound path for the GBP/USD pair.
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