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The Pound Sterling is consolidating around $1.3380 at the start of Tuesday's trading session, down from yesterday's peak of 1.3422, hovering near its highest levels since March 2022, as traders assess economic and monetary expectations. The UK Economy grew by 0.5% on a quarterly basis in the second quarter of 2024, slightly below the initial estimate of 0.6%, and expanded by 0.7% in the first quarter. Also, Inflation reached 2.2% in August. Meanwhile, the bank of England kept interest rates steady at 5% in its September 2024 meeting, in line with expectations, and said that a gradual approach to removing policy constraints remains appropriate.
The central bank cut interest rates by a quarter point in August, and another cut in November remains possible. According to Forex Market Trading, the British pound continues to benefit from the general weakness in the US dollar as traders expect faster monetary easing from the Federal Reserve compared to other major central banks, including the Bank of England. During September, the pound rose by 1.9%.
Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money GBP/USD Forecast for this week: All signs are green
The GBP/USD exchange rate could continue to advance in the coming days according to this week's pattern. The Fed's statements and US payrolls are the main risks to the positive setup. According to Forex Market Trading, the pound has risen for three consecutive months against the US dollar and maintains positive upward momentum that could extend in the coming days forecasts for the GBP/USD pair today:
The GBP/USD exchange rate peaked at 1.3433 last week and has since declined to 1.3385, the level where we find it at the time of writing. Technically, the rally appears to be consolidating around these levels ahead of an eventful week. This consolidation is essential, as the exchange rate rose into overbought territory last week, with the Relative Strength Index (RSI) breaking above 70, which indicates overbought conditions, requiring a pullback or consolidation to recover.
The RSI has since fallen to 63.69, confirming that GBP/USD is no longer overbought on the daily timeframe. Our set of technical indicators are flashing green and calling for gains. For now, any weakness is likely to be temporary. The next upside target is around 1.3510, a set of support and resistance dating back to January 2022.
Commenting on the pair's performance, Shaun Osborne, analyst at Scotiabank, said:“The broader pattern and chart tone remain bullish for GBP, amid steady GBP gains and strong upside momentum on short-, medium- and long-term oscillators.” he added,
“GBP declines are expected to remain relatively shallow,”
Moving on to event risks over the coming days, the week will be quiet in the UK, but the US will provide important data and speeches from the Fed's rate-setters. Sterling tends to rise when stock markets are rising, which could continue as long as markets believe the Fed will continue to cut rates.
However, any strong data from the US could signal a slowdown in the pace of rate cuts, which could cause a setback for markets. With this in mind, watch the US PMI survey data on Tuesday and speeches from FOMC members Cook, Collins, Barkin and Bostic. Bowman and Barkin will speak on Wednesday. There are more US PMI numbers on Thursday (covering the services sector), which should keep markets entertained ahead of the week's highlight, the non-farm payrolls release on Friday.
Here, US jobs are expected to come in at 144,000. The rule of thumb is that anything slightly below that would signal the need for further Fed cuts and maintain a supportive mood for global risks and the pound. Nevertheless, a big drop could backfire as it could signal that the economy may be slipping into recession. If the numbers surprise positively, markets are sure to fall as investors rush to bet that the Fed will slow the pace of cuts. That could deal a blow to the pound and spur a recovery in the US dollar.
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