- The GBP/USD forecast reveals weakness amid the UK fiscal uncertainty.
- The US dollar edged up as Chair Powell came up with a cautious tone for a December cut.
- Traders await the BoE interest rate decision and US NFP data next week.
The GBP/USD weekly forecast reflects a persistent bearish bias, closing the week at 1.3140. The pound sterling faced pressure amid renewed UK economic concerns and a resilient greenback. The US dollar was boosted as Fed Chair Powell expressed uncertainty about a December rate cut, cautioning the markets.
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However, the policymakers remained divided about the Fed cut. The Cleveland Fed President Hammack expressed her lack of support for the recent Fed cut. Meanwhile, the Atlanta Fed’s Bostic noted the conflict between the dual mandates of price stability and employment.
On the UK side, the pound was subdued as the markets grappled with the UK’s fiscal situation. The Office for Budget Responsibility (OBR) lowered the productivity forecast by 0.3%, aiming for a potential £21 billion increase in the budget deficit by 2030.
Meanwhile, the Institute for Fiscal Studies (IFS) estimated a fiscal gap of £22 billion. Chancellor Rachel Reeves is pressured to increase taxes or borrow more in the November budget to curb this. The investor sentiment dampened slightly due to Reeve’s position. However, PM Keir Starmer backed her, easing the situation. Meanwhile, weak inflation data and rising expectations for further easing by the BoE further pressured the pound.
GBP/USD Key Events Next Week
The major events in the coming week include:
- USD ISM Manufacturing PMI
- Fed’s Daly Speech
- GBP BoE Interest Rate Decision
- USD Nonfarm Payrolls
- USD Average Hourly Earnings (YoY)
- USD Average Hourly Earnings (MoM)
Next week, traders anticipate the Fed’s Daly speech, the ISM manufacturing PMI, and ADP Employment. However, the nonfarm payrolls data remains the primary catalyst for the markets, as the markets missed the previous data amid the shutdown.
On the other hand, traders look ahead to BoE interest rate decisions for insights into potential rate cuts ahead. Markets are pricing in no change in the benchmark rates. Hence, the vote split will be the key to watch.
GBP/USD Weekly Technical Forecast: No Respite for Bulls Until 200-DMA
The GBP/USD stays under pressure, trading around 1.3140 after pulling back from 1.3370 earlier this week. The pair is well below the 20-day MA near 1.3338 and the 50-day MA around 1.3432, reflecting the downside pressure. Meanwhile, the 200-day MA around 1.3244 is a key support zone. The RSI at 40, above the oversold region, indicates that the downside pressure could stay intact unless a reversal signal emerges.
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A decisive break above 1.3330 could alter the trend and open room for gains toward 1.3400 and 1.3460. Conversely, a sustained drop below 1.3100 could extend the downside towards 1.3050 and 1.2980.
Support Levels
Resistance Levels
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