- Resilience characterizes the performance of the price of the British pound against the US dollar GBP/USD recently, and last week the bulls tried to take off with the currency pair above the resistance 1.2775.
- obviously, in light of the strength of the US dollar against the rest of the other major currencies, after the positive US economic data and the signals of US Central Bank officials, the price of sterling stabilizes.
- Currently, US Dollar around the 1.2700 level at the beginning of this important week’s trading.
The sterling price is awaiting the British Central Bank’s policy update this week. The Bank of England could back off its threat to raise interest rates again, if necessary, after UK wage growth slowed at one of the fastest paces on record. However, there is reason for caution, not least after data showed an unexpected rise in inflation last month. That will be next Thursday. Before the end of last week's trading, the pound sterling exchange rate fell against the dollar (GBP/USD), as new US GDP data revealed that the US economy expanded beyond expectations in the fourth quarter of 2023. Later, the tailwinds for the British pound (GBP) diminished, as investors digested disappointing British retail sales numbers.
Recently, the price of the US Dollar (USD) rose against other major currencies as the latest GDP data sparked an upward trend. The US economy saw growth of 3.3% in the last quarter instead of the expected 2%, indicating strong economic growth and inspiring hopes for a more hawkish Federal Reserve this week. The data came in less than the third quarter's 4.9% rise, but still sparked bullish sentiment among investors. In transcribing the statement, the US Bureau of Economic Analysis (BEA) noted:
“Increases in real GDP reflect increases in consumer spending, exports, state and local government spending, nonresidential fixed investment, federal government spending, private inventory investment, and residential fixed investment.” The flat reading for durable goods may have limited the USD's gains somewhat. Also, December data was expected to come in at 1.1% but instead came in at 0.0%. Reuters analysts pointed to a decline in transportation equipment, noting that orders fell by 0.9% last month after rising by 0.9%. 15.3% in November. However, investors are still hopeful that the US Federal Reserve will take a more hawkish tone than other major central banks this week. Interest rate cut bets are supporting the dollar, given recent signs that the US economy is strengthening, and according to a report by UBS economists, “better relative growth in the US compared to Europe and a partial reversal of US interest rate cut expectations should support the US dollar in the near term.”
In general, the exchange rates of the pound sterling fluctuate amid market fluctuations. Moreover, the pound sterling was trading in a mixed range against the rest of the major currencies. Furthermore, upbeat PMI data released earlier last week provided tailwinds, but the latest report from the Confederation of British Industry (CBI) was disappointing and a risk-off mood limited gains.
Meanwhile, the price of the pound sterling enjoyed a wave of support after the release of services and manufacturing data for January in the middle of last week. Despite manufacturing activity remaining in contraction, the index rose to its highest point in nine months. Ultimately, the services sector PMI came in at 53.8 – recording growth rather than the expected slowdown. In general, the uncertainty preceding the central bank decisions this week from the Bank of England and the US Federal Reserve has exacerbated the risk aversion position in the markets.
GBPUSD Expectations and Analysis Today:
The pound's expectations against the US dollar GBP/USD show that it is still on an upward rebound path and breaking the resistance 1.2775 will motivate the bulls to take more control. As we mentioned before, moving towards the psychological resistance 1.3000 will be important if the bulls succeed in moving towards the resistance 1.2850 following this week's data and events. Led by the announcement of both the Bank of England and the US Central Bank, ending with the announcement of US job numbers. On the other hand, and for the same time period on the daily chart, the 1.2600 support will remain the most important to confirm the start of the downward shift. Finally, we expect a calm trading session today, as the economic calendar is devoid of important and influential economic releases.
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