A Weekly Look at the GBP/USD in the Week Ending March 15, 2024
In the week culminating on March 15, the GBP/USD experienced a descent of 0.96% to $1.27316. This journey witnessed the GBP/USD ascending to a height of $1.28620 on Monday and then plummeting to a low of $1.27204 by the time Friday arrived.
Diving Deeper into the GBP/USD Scenario
The forthcoming week beckons investor attention towards the UK inflation figures for February, anticipated with bated breath on Wednesday. The trajectory of inflation could sway predictions about a potential 2024 interest rate cut by the Bank of England. A prolonged higher interest rate tenure from the BoE might constrict disposable incomes, quell spending impulses, and stifle demand-induced inflation.
Economic prognosticators have their sights set on the UK’s annual inflation rate, envisaged to soften from 4.0% to 3.6%. The GBP/USD union is poised to exhibit heightened sensitivity to these February figures, especially with the BoE poised for action on Thursday.
Thursday further fuels the economic narrative with the preliminary UK private sector PMIs making their grand entrance. Among these, the Services PMI is expected to steal the limelight, given that the services domain contributes over 70% to the UK’s economic standing.
While the Services PMI takes center stage, the Bank of England’s monetary policy verdict looms large. Market sentiments anticipate the interest rates to stay at 5.25% on Thursday. However, the ballot count and the minutes from the monetary policy meeting merit contemplation – an assertive vote count alongside an advocate pitch to maintain rates until Q4 2024 could accelerate the Pound’s market favor.
Friday follows through with UK retail sales beckoning investor scrutiny. A sustained surge in consumer spending could stoke demand-related inflation and underpin confidence in a BoE status quo for 2024. Economic seers foresee a 0.3% decline in retail sales in February post a robust 3.4% upswing in January.
Peering into the US Economic Landscape: Federal Reserve Dynamics and the Services Sector
Tuesday ushers in a spotlight on the US housing sector. These housing metrics often act as precursors to the wider US economic pulse. An ailing housing sector ambiance could have ramifications on consumer sentiment and expenditures, potentially signaling a rough economic descent. Given that private consumption contributes over 60% to the US economic engine, these trends warrant alert monitoring.
On Wednesday, pivotal Federal Reserve dynamics take center stage with the interest rate decision, FOMC Economic Projections, and Fed Press Conference commanding investor focus.
As the dust around recent inflation numbers settles, the Economic Projections and Fed Press Conference are poised to govern short-term US dollar trajectories. The consensus amongst experts anticipates the Federal Reserve maintaining interest rates at 5.5%.
Thursday shines the spotlight on the Philly Fed Manufacturing, private sector PMIs, and weekly jobless claims – yet, the Services PMI likely holds sway over the GBP/USD verdict. The services sector, a principal driver of inflation, accounts for over 70% of the US economy.
A Glimpse into the Immediate Forecast
The looming forecast for the GBP/USD will pivot around the Federal Reserve and Bank of England’s policy stances and their foresight commentary. Nevertheless, the Services PMIs and UK retail sales reports are set to steer the course. In a scenario where a robust UK economy meets vulnerabilities in the US economic fabric, the coveted $1.29 benchmark may grace the narrative.
GBP/USD Price Scenario
The Daily Chart
Hovering above the 50-day and 200-day EMAs, the GBP/USD radiates bullish price signals.
A breach above the $1.28013 resistance juncture for the GBP/USD could pave the way for a quest towards the $1.30 milestone.
The harmonious amalgamation of reflections from the Fed and the BoE alongside economic metrics from the UK and the US amplifies this scenario.
Conversely, a downward break beneath the 50-day EMA could set the stage for engagement with the 200-day equivalent.
With the 14-period Daily RSI pitching at 52.70, signs point to the GBP/USD resuming its journey towards the $1.30 threshold before edging towards overbought terrains.
The 4-Hour Chart
While resting shy of the 50-day EMA, the GBP/USD maintains its perch above the 200-day counterpart, hinting at contrasting near-term bearish and long-term bullish indications.
A breach of the 50-day EMA and the $1.28013 resistance fort could herald the ascent towards $1.30.
On the flip side, a dip under the 200-day EMA may steer the GBP/USD towards the $1.26500 milestone.
The 14-period 4-Hourly RSI standing at 35.85 forecasts a GBP/USD descent towards the 200-day EMA before venturing into oversold territories.
This article was initially published on FX Empire
More Insights from FXEMPIRE:
The expressions and opinions herein solely belong to the author and might not align with those of Nasdaq, Inc.
