GBP-USD Prediction – Soft Inflation to Get $1.24 Into Play

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The GBP-USD secured an easy footing. Hopes of softer United States inflation and United Kingdom economic data ensured market sustenance ahead of the Monetary Stability Report.

GBP-USD has a busy session early today, with attention directed to November claimant count figures, October unemployment numbers, and average earnings. Better-than-anticipated GDP figures could not support Monday’s session, even as the United Kingdom economy grew by 0.5% during October, following September’s 0.6% contraction.

The numbers weren’t hawkish enough to change sentiment toward the Bank of England’s Thursday financial policy decision. Meanwhile, the United Kingdom economy saw a 0.3% contraction on a 3-month basis versus September’s 0.2% contraction.

Nevertheless, today’s economic indicators might give Financial Policy Committee officials something to contemplate. October had average earnings and rewards at a 6.1% Y/Y increase versus September’s 6.0%. Wage growth minus bonuses surged 6.1% versus September at 5.7%. The National Statistics offices revealed that:

  • The United Kingdom’s employment surged 0.2% to 75.6% between August and October this year.
  • Nevertheless, the unemployment rate hit 3.7% following a 0.1% uptick during that timeframe.
  • Employment partially reversed September 52K drop with a 27K increase.
  • November saw claimant counts gaining by 30.5K after October’s 3.3K upticks, indicating continued upside trends in unemployment through the 4th quarter.

Following today’s numbers, market attention will change to the United Kingdom CPI data on Wednesday. Nevertheless, the Bank of England Monetary Stability Report will attract curiosity later today without MPC member talks for market players to ponder. Meanwhile, BoE staff comments on the stats and the economic picture would move markets ahead of United States CPI today.

GBP-USD Price Action

The pound hovered at $1.22910 during this writing, following a 0.22% uptick. Meanwhile, a mixed start saw the pair dipping toward the $1.22518 low before climbing to the $1.23012 peak. According to technical indicators, GBP-USD should evade the pivot zone at $1.2256 to eye the initial massive resistance structure at $1.2307.

After the employment figures, the United States CPI data should fall short of predictions to support breakouts. An extended upside will likely push the pair to test the 2nd obstacle near $1.2349 before hitting the resistance level at $1.24. GBP-USD’s third resistance stands at $1.2442.

Meanwhile, falling through the mentioned pivot would see the currency exploring the first massive support floor at $1.2214. Nevertheless, excluding data-triggered sell-offs, GBP-USD should dodge sub-$1.2150. The other support at around $1.2163 should restrict more dips. The 3rd crucial support sits near $1.2070.

Evaluating the 4hr chart and the Exponential Moving Average shows the EMAs flashing bullish signals. The GBP-USD sways beyond the $1.22027 50-d Exponential Moving Average. The 50EMA drifted from the 100EMA, as the 100EMA pulled from the 200EMA, presenting bullish signs.

Stability beyond the initial support at $1.2214 and the $1.22027 50-d EMA would support upsides past the $1.2307 first resistance. That would clear the way to the $1.2349-second resistance and $1.24. Nevertheless, GBP-USD surrendering the initial $1.2214 footing would see the pair slumping to $1.2163 support. Meanwhile, the 200-d Exponential Moving Average stands at $1.19077.

The United States Session

Today’s focus remains on the November United States CPI data. Markets forecast a 50bp hike by Fed. Meanwhile, the hotter-than-anticipated inflation figure might welcome uncertainty ahead of Wednesday’s decision. Though Powell highlighted by Fed easing the hiking pace, the Fed Chair didn’t deliver a timeline.

Meantime, inflation numbers, Service Sector PMI, and U.S Jobs data continue to back hawkishness. That leaves the CPI stats to determine Wednesday’s policy decision & forward guidance. No FOMC member remarks today. The Federal entered a blackout phase on December 3.

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