GBP/USD made a recovery on Monday. It moved back towards the 1.2700 handle. This ended a three-day losing streak that had pulled the pair down near the 1.2600 handle last week. The pair gained a little over half a percent on Monday.
Central Bank Events This Week
Fed’s Rate Decision
The Federal Reserve is widely expected to cut rates by 25 basis points. The markets have priced in this cut with a 99.1% probability, as shown by the CME’s FedWatch Tool. Traders will closely watch the Fed’s updated Summary of Economic Projections and the interest rate forecasts from policymakers. The Fed’s rate decision is on Wednesday.
BoE’s Rate Call
The Bank of England is seen as likely to keep interest rates steady. In an expected eight-to-one vote split, only one particularly dovish BoE policymaker is thought to vote for another cut. The BoE’s rate call is scheduled for Thursday.
UK Data and Its Impact
UK Services and Manufacturing PMI
The UK Services PMI survey results hit an 11-month low in December. But an increase in the Manufacturing component helped GBP sentiment.
UK Wages and Labor Data
GBP traders will look at Tuesday’s UK wages and labor data. The quarterly Average Earnings are expected to rise to 5% year-on-year.
UK CPI Inflation Figures
GBP traders will also get an update on UK Consumer Price Index (CPI) inflation figures on Wednesday.
US Data and Market Reactions
US PMI Figures
The US PMI figures for December were a mix. The Services PMI reached multi-year highs, while the Manufacturing PMI fell below 50.0, showing a contraction.
US Retail Sales Data
Retail Sales data will be released on Tuesday. But it may not get much market attention as the focus is on the Fed’s final rate decision of the year.
GBP/USD Price Forecast
Daily Chart Analysis
The GBP/USD daily chart shows a broader bearish trend. The price is staying below both the 50-day EMA at 1.2802 and the 200-day EMA at 1.2820. The downward-sloping moving averages show that sellers are in control. The MACD indicator is weak, with its histogram showing little bullish momentum. This means any upward moves could face strong resistance.
Recent Candle and Resistance/Support Levels
The latest candlestick is a small green one. It shows a modest recovery after the sharp decline in the previous session. But the rebound is limited. The pair is having trouble getting above the 1.2700 handle. This shows that traders are undecided and there’s a risk of another downward move. If sellers take over again, the pair could move towards the 1.2600 support zone. If it breaks above the 50-day EMA, the 1.2820 region could become important as there is stronger resistance there. Until then, GBP/USD is at risk of going down.
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