News

Oct 02, 2023

GBP to USD Forecast: Sub $1.27 in the Hands of the US Jobs Report

On Thursday, the GBP to USD fell by 0.02% to wrap up the day at $1.27082. UK economic indicators took a back seat, with the Bank of England’s 25-basis point interest rate hike failing to deliver a

On Thursday, the GBP to USD fell by 0.02% to wrap up the day at $1.27082. UK economic indicators took a back seat, with the Bank of England’s 25-basis point interest rate hike failing to deliver a breakout session.

It is a quiet day ahead for the GBP to USD, with no UK economic indicators for investors to consider. The lack of economic indicators will leave Bank of England commentary to move the dial.

Bank of England Chief Economist Huw Pill is on the calendar to speak today. Guidance on what to expect after the summer break will influence investor sentiment. The Bank’s Chief Economist will deliver a monetary policy report national agency briefing at 1215pm BST.

It is a busy US session, with the US Jobs Report to draw interest. A pickup in wage growth and a steady US unemployment rate would refuel bets on a September Fed rate hike. Economists forecast average hourly earnings to slow from 4.4% to 4.2 and the unemployment rate to hold steady at 3.6%.

The US labor market forms part of the Fed’s dual mandate. The FOMC Committee forecasts the longer-run normal rate of unemployment to be 4.1%. The US unemployment rate fell from 3.7% to 3.6% in June. Tighter labor market conditions would lead to higher wage growth levels and a demand-driven inflation pickup. Higher borrowing costs would curb hiring and wage growth.

The Daily Chart showed the GBP to USD sat below the $1.2862 – $1.2785 resistance band. Looking at the EMAs, the GBP to USD remained below the 50-day ($1.27417) while holding above 200-day ($1.24430) EMAs, sending bearish near-term but bullish longer-term price signals.

Notably, the 50-day EMA narrowed to the 200-day EMA, signaling further losses.

Looking at the 14-Daily RSI, the 44.31 reading sent bearish price signals. Aligned with the 50-day EMA ($1.27417), the RSI signals a fall to sub-$1.27 to bring $1.26 into view. However, a move through the 50-day EMA ($1.27417) would support a breakout from the $1.2785 – $1.2862 resistance band to target $1.29.

Looking at the 4-Hourly Chart, the GBP to USD hovers below the $1.2862 – $1.2785 resistance band. The GBP to USD also sits below the 50-day ($1.28019) and 200-day ($1.27968) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA converged on the 200-day EMA. A bearish cross would signal a fall to sub-$1.27 and bring $1.26 into view. However, a GBP to USD move through the EMAs would support a breakout from the $1.2862 – $1.2785 resistance band to give the bulls a look at $1.29.

The 14-4H RSI reading of 43.96 sends bearish signals, with selling pressure outweighing buying pressure. Significantly, the RSI is aligned with the EMAs, signaling a GBP to USD return to sub-$1.27.

Price action today is hinged on the US Jobs Report.