Contrary to the performance at the beginning of trading this week, the price of the pound sterling against the US dollar GBP/USD has returned to rebound higher. with gains reaching the resistance level of 1.2762, which is stable around it at the time of writing the analysis. In the midst of the rebound, the pound sterling against the dollar could receive signals from the UK Consumer Price Index report scheduled to be released later today. Consequently, this could determine the tone of the Bank of England's next decisions. Also, keep in mind that policymakers voted to keep interest rates unchanged by a majority of 3-6 votes, which turned out to be more hawkish than the estimated vote of the Monetary Policy Committee by a majority of 2-7.
The headline UK CPI is expected to slow from 4.6% to 4.3% year-on-year, confirming the central bank's decision to remain unchanged. Moreover, a smaller decline in price pressures could revive interest rate hike expectations, while a sharp decline could spark talks about potential cuts, which could be bearish for sterling. Meanwhile, the US dollar can await the release of the core PCE price index in the US on Friday, as this may also highlight the Federal Reserve's expectations for interest rate cuts for next year.
What is expected for the British pound in the upcoming days?
Meanwhile, the recent events have exceeded Goldman Sachs' baseline assumptions for 2024, and economists at the Wall Street bank announced revisions to their dollar forecasts before the start of the new year. Furthermore, in the wake of recent bearish surprises in US inflation readings and the Federal Reserve's FOMC meeting last week, Goldman Sachs economists made a "major" change in their call for the US Federal Reserve.
Now, they expect five US interest rate cuts from the Federal Reserve next year, compared to just one cut in the initial 2024 outlook publication. This led to a widespread reduction in Goldman Sachs's forecasts for the US dollar for next year. In this regard, Kamakshya Trivedi, an analyst at Goldman Sachs, says: “Our new expectations include greater dollar weakness than before.”
Recently, at the FOMC meeting in December, policymakers added another 25 basis points of US interest rate cuts to their assumptions for 2024. For his part, Committee Chairman Jerome Powell said in the press conference that the committee discussed the timing of interest rate cuts, and they saw the need to “reduce restrictions long before they are reduced Inflation by 2%.” Now, the Fed expected to cut interest rates five times in 2024, the dollar could weaken, but Goldman Sachs says that would not be a defeat.
GBPUSD Expectations and Analysis Today:
GBP/USD Forecast shows the price rising above a short-term downtrend line to indicate a reversal is in order, and after pulling back into an area of interest. Technically, the Fibonacci retracement tool shows levels where buyers may be looking to jump to. Already, the price is testing the 50% Fibonacci level near the dynamic inflection point of the 100 SMA and the secondary psychological mark at 1.2650. therefore, a larger correction may reach the 61.8% Fibonacci level, which coincides with the 200 SMA dynamic support level.
Meanwhile, the 100 SMA is located above the 200 SMA to confirm that the general trend has turned to the upside or that support is likely to continue rather than breakout. In this case, GBP/USD could soon make its way back to the swing high near the key psychological level of 1.2800 or higher. At the same time, the Stochastic indicator is already moving higher, confirming that the upward momentum is rising and could allow the uptrend to gain strength. Also, the RSI is trending higher, so prices may follow suit while buyers have control.
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