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GBP/USD Analysis: Bulls Looking for Stimulus

Sterling shows resilience, pushing towards 1.2710. Awaiting US inflation data, global sentiment; 1.2775 next bullish target, 1.3000 in sight.

  • The Sterling price continues to show unique resilience against the recent gains of the US dollar against other major currencies.
  • During last week's trading, the bulls managed to move the GBP/USD currency pair towards the 1.2710 resistance level before closing trading stable around the 1.2670 level amid a weekly bullish close.  

GBP/USD Analysis Today - 26/02: Bulls Looking for Stimulus (Graph)

Generally, risk conditions were broadly favorable, which helped support the pound against the rest of the other major currencies. According to ING Bank, the GBP/EUR pair could achieve limited net gains according to interest rate expectations. He note, "We have some doubts that EUR/GBP can rise further in the near term, as markets may be more inclined to push the ECB's dovish 2024 expectations to 100 basis points (now 90 basis points) instead of pricing in three full cuts in Britain." 

According to the Economic Calendar data, the PMI data for business confidence in Britain in general was slightly stronger than expected. For its part, MUFG Bank indicated: “UK data was also an indicator of improving prospects and the technical slump that occurred in the second half of last year appears likely to be over.” 

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    Overall confidence in the UK economy has improved, although there are still obstacles to sustainable recovery. For example, the UK Consumer Confidence Index (GfK) fell to -19 for February from a reading of -19 in the previous month, compared to the consensus expectations for further slight improvement this month. Four out of the five components decreased during the month while there was no change in expectations for the personal financial situation. Commenting on this, Joe Staton, a director at GfK, remarked that it was "a mixture of bad news and good news." According to him, "The bad news is that the improvement in the overall score of the index over recent months has paused slightly in February due to declines in most measures. However, the good news is that optimism about our personal financial situation over the next 12 months has not waned."  

    He added, "With the underlying trend pointing to a slowing improvement in UK consumer mood, monthly fluctuations are a normal part of the long-term picture. Over time, we hope that measures aimed at moving us to a more economically stable environment will boost consumer confidence. As long as the underlying positive trend does not suddenly reverse, patience will pay off." 

    On the other hand, MUFG Bank commented, "The better data in the UK and strong risk appetite should benefit the British pound more than what we have seen so far. However, concerns about growth still linger and may hinder the pound. Mortgage rates have turned moderately higher again, which could amplify these concerns." 

    GBPUSD Expectations and Analysis Today: 

    According to the performance on the daily chart above, the GBP/USD currency pair is moving within a recently formed ascending channel. Technically, a move above the 1.2775 resistance level will be important for further bullish control, and the next important bullish level will be the psychological resistance level of 1.3000. This could happen if the US inflation reading this week comes in below expectations and US economic growth slows again, and vice versa if the figures come in stronger than expected, the current bullish hopes may evaporate, and the GBP/USD pair may return to the 1.2600 support level again. Finally, caution must be exercised regarding the reaction of US economic data this week, along with the performance of global financial markets and investor sentiment, which have an impact on the performance of the British pound. 

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    Mahmoud Abdallah
    About Mahmoud Abdallah
    Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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