Home GBP/USD Forecast: Less Hawkish Fed Triggers Sterling Bulls

GBP/USD Forecast: Less Hawkish Fed Triggers Sterling Bulls

  • A majority of Fed policymakers agreed on smaller rate hikes.
  • US unemployment claims rose more than was predicted last week.
  • British economic activity remained close to 21-month lows, confirming a recession.

Today’s GBP/USD forecast is bullish. Sterling climbed on Thursday for the third day against a falling dollar as investors bet on riskier assets. They were encouraged by the prospect of slower interest rate increases from the Federal Reserve. At the same time, the pound is getting support from upbeat economic activity data.

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According to the FOMC meeting minutes, a “substantial majority” of Fed policymakers agreed that it would “likely soon be appropriate” to halt the rate of interest rate increases. Traders anticipated that the Fed minutes would confirm officials’ softening stance following recent data showing a slowdown in economic conditions.

According to figures released by the US Labor Department on Wednesday, unemployment claims rose more than was predicted last week. The S&P Global flash US Composite PMI Output Index indicated that business activity in the United States decreased for a fifth consecutive month in November.

On Wednesday, flash purchasing manager index (PMI) data revealed that British economic activity remained close to 21-month lows, confirming a recession as orders fell and employment growth stalled. The upcoming winter will be difficult, given the start of the recession and rising energy prices.

Although the most recent PMI readings remained below 50, which is the cutoff point for contraction, the data was slightly better than economists surveyed by Reuters had anticipated, which caused the pound to strengthen.

GBP/USD key events today

There won’t be any significant news releases from the US or the UK. The US will observe Thanksgiving Day, which could mean a quiet trading session.

GBP/USD technical forecast: Bulls in the overbought region

GBP/USD forecast

Looking at the 4-hour chart, we see the price trading well above the 30-SMA and the RSI in the overbought region. This shows the current move is bullish and has a lot of momentum. The price had been caught between the 1.2007 resistance and the 1.1755 support levels for some time.

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Although bears tried to take over by pushing the price below the 30-SMA, bulls returned with enough momentum to push beyond the 1.2007 resistance. Bears might come into retest 1.2007, as the price is currently overbought before the uptrend continues.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.