Summary of Last Week’s Movement
- The Pound Sterling (GBP) experienced a rollercoaster ride against the US Dollar (USD). An initial rebound from seven-week lows was met with a reversal as the USD gained strength on positive economic data. This data included the robust ISM Manufacturing PMI, JOLTS job openings, and strong ADP Employment numbers.
- Although some Fed officials hinted at potential rate cuts, the market remained focused on the US economy’s resilience. This created uncertainty for GBP/USD, causing fluctuations throughout the week.
- The stellar US jobs report (NFP) on Friday acted as the final catalyst, firmly pushing the USD higher and sending GBP/USD below the 1.2600 mark.
Factors Influencing GBP/USD This Week
Here’s a deeper look at what to expect:
- US Inflation Data (CPI and PPI): These are the top priority this week. Higher-than-expected inflation numbers could solidify expectations of a hawkish Fed, boosting the USD and pressuring GBP/USD. Conversely, if inflation shows clear signs of cooling, it could signal a potential Fed policy shift, providing relief to the Pound.
- Fed Minutes: Insights into the decision-making process behind the March Fed meeting could reveal the depth of hawkish sentiment within the committee. Any strong hawkish leanings would likely support the USD.
- UK GDP Data: The health of the UK economy will be in focus with February’s GDP figures. A positive reading could bolster the Pound, while disappointing data might put further downward pressure on it.
- US Consumer Sentiment: The preliminary Michigan Consumer Sentiment and Inflation Expectations figures offer valuable clues about consumer confidence and perceived price pressures. These could sway USD valuation.
- Fed Policymaker Speeches: Expect continued interest rate guidance and commentary from various Fed officials. Watch closely for any change in tone that could sway market expectations and impact the GBP/USD exchange rate.
Technical Outlook
- Short-Term Bearish Bias: A weekly close below the 200-day SMA (1.2587) would suggest the bears remain in control, opening the door for a push towards 1.2540 (April low) and 1.2500 (psychological level). A break below 1.2500 might lead to a retest of the 1.2400 threshold.
- Resistance to Monitor: If buyers manage to hold the 200-day SMA, a short-term recovery could ensue. In this scenario, GBP/USD might challenge the 1.2700 level once again.
In Conclusion: This week anticipates continued GBP/USD volatility, heavily driven by US inflation figures and ongoing Fed communication. Traders should monitor these events closely and adjust their strategies accordingly.