The GBP/USD pair remains stable for the second consecutive session, trading near 1.2750 during Tuesday’s Asian trading hours. While the pair has shown resilience, looming US inflation data and a firm US Dollar (USD) present challenges for further upside momentum.
US Dollar Gains Ahead of CPI Data
The USD continues to edge higher as traders adopt a cautious stance ahead of Wednesday’s US Consumer Price Index (CPI) report. The Federal Reserve Bank of New York’s latest consumer survey revealed improved sentiment about financial conditions, credit affordability, and fiscal policy.
Adding to USD strength, Friday’s robust US Nonfarm Payrolls (NFP) report highlighted a gain of 227,000 jobs in November, surpassing expectations. Average Hourly Earnings grew by 0.4% month-over-month, underscoring labor market resilience. Despite this strength, traders are pricing in an 85.8% likelihood of a 25-basis-point Federal Reserve rate cut on December 18, according to the CME FedWatch Tool.
Pound Sterling Awaits Key Data and BoE Decision
The Pound Sterling (GBP) hovers near four-week highs as investors look toward significant economic releases and central bank actions:
Economic Data: Friday’s UK GDP report is expected to show a rebound in economic activity for October, supported by signs of recovery in the manufacturing sector.
Bank of England Outlook: The BoE is widely expected to keep interest rates unchanged at its December 19 meeting. However, Deputy Governor Sir Dave Ramsden emphasized the importance of remaining “vigilant” amid economic uncertainties.
Technical Analysis: GBP/USD Balanced but Vulnerable
The GBP/USD pair is trading within a narrow range, reflecting market indecision as traders await critical data.
Support Levels:
- Immediate support lies at 1.2720, the 20-day Exponential Moving Average (EMA).
- Further downside could expose the 1.2650 level, which coincides with the 50-day EMA.
Resistance Levels:
- The first hurdle for the pair is at 1.2785, representing the recent four-week high.
- A sustained move above this level could open the path toward 1.2850, a significant psychological barrier.
- The Relative Strength Index (RSI) is hovering near the neutral 50 level, indicating a lack of strong directional bias.
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