GBP to USD forecast: GBP/USD remained stable on Friday and is set for its biggest weekly increase since mid-September, as the US dollar retraced some of its gains following Trump's victory.
The dollar has declined this week after eight consecutive weeks of gains. This drop follows President-elect Donald Trump's appointment of hedge fund manager Scott Bessent as Treasury Secretary, which has reassured investors. Bessent is viewed as an experienced figure on Wall Street, and his appointment is expected to temper some of Trump's more radical inflationary policies.
Interestingly, the US dollar continued to weaken despite positive economic data, including an upward revision to Q3 GDP and a decrease in jobless claims. Inflation also edged up to 2.8% from 2.7%. Subsequently, the market revised the likelihood of a December rate cut by the Federal Reserve, raising the probability to 68%, up from 55% at the beginning of the month.
Looking ahead to next week, traders will face a wealth of US data as they return from the Thanksgiving holiday. Key reports will include ISM services data and US non-farm payroll figures following October’s surprising 12,000 jobs report. Any indications of an economic slowdown could further weaken the dollar.
Additionally, the USD has fallen below a significant technical level, the 23.6% retracement from the low of 100.15 to the high of 108.09, potentially paving the way for further declines.
GBP/USD Forecast: GBP/USD has rebounded from the November low of 1.2487, moving back above the June low of 1.2620 but struggling to maintain levels above 1.27. The long upper wick on today’s candle is concerning, and coupled with the price remaining below the 200 SMA and the 50 SMA crossing below the 100 SMA, the overall outlook remains bearish.
For buyers, a close above 1.27 would be necessary to shift towards a more neutral stance, with the next target being the 200 SMA at 1.2820.
On the other hand, sellers are eyeing a move below 1.2560, which aligns with a declining trendline from August 2021, thereby bringing the 2024 low of 1.2487 into play. A break below this level would confirm a lower low.
Today, the Bank of England's financial stability report cautioned that increased trade barriers could negatively impact global growth, leading to heightened uncertainty and volatility.
This year, the pound has performed better than many other currencies against the USD. Economic growth has been satisfactory, yet wage and service inflation remain persistent, restricting the potential for rate cuts by the Bank of England.
Looking ahead to next week, the UK economic calendar is relatively quiet, allowing the USD and overall market sentiment to take precedence. Any further gains for the pound would likely stem from a weakening dollar. However, the technical outlook for GBP/USD does not appear encouraging for bulls.
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