POUND STERLING ANALYSIS & TALKING POINTS
- UK labor statistics should keep the BoE’s prediction to resist rate cuts on course.
- US CPI & ZEW economic sentiment to come.
- Pound crosses display hesitancy ahead of key economic releases.
Elevate your trading skills and gain a competitive edge. Get your hands on the BRITISH POUND Q4 outlook today for exclusive insights into key market catalysts that should be on every trader's radar.
POUND FUNDAMENTAL BACKDROP
The British pound remained relatively unchanged against both the euro and USD respectively after the UK jobs report (see economic calendar below) revealed some robust headline data (employment change and unemployment) coupled with misses on wage data. It now seems almost certain that wages including bonuses may not creep up back above 8% in the UK; a net positive for the Bank of England’s (BoE) fight against inflation. Job vacancies are also on the decline and fell on the quarter for the 17th consecutive period as stated by the Office for National Statistics.
GBP/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX Economic Calendar
Interest rate expectations (refer tot able below) for the BoE did not change post-announcement with markets forecasting roughly 75bps of cumulative rate cuts by December 2025 with the first cut taking place around June/August. The BoE rate decision on Thursday will most likely see Governor Andrew Bailey push back against rate cuts and maintain the higher for longer narrative that could buoy the pound.
BANK OF ENGLAND INTEREST RATE PROBABILITIES
Source: Refinitiv
Of recent, the pound has been largely dictated by shifts in money market pricing for the European Central Bank (ECB) and Federal Reserve. The euro area looks to far weaker than the UK according to latest economic data while the US will look to this afternoons CPI for guidance.
Trade Smarter - Sign up for the DailyFX Newsletter
Receive timely and compelling market commentary from the DailyFX team
TECHNICAL ANALYSIS
GBP/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily GBP/USD price action keeps bulls hovering above the 200-day moving average (blue) and the 1.2500 psychological handle. Elevated US CPI could see a retest of these support levels, possibly brining into consideration the 1.2400 zone once again.
Key resistance levels:
- 1.2900
- 1.2848
- 1.2746
Key support levels:
- 1.2500
- 200-day MA
- 1.2400
MIXED IG CLIENT SENTIMENT (GBP/USD)
IG Client Sentiment Data (IGCS) shows retail traders are currently equally SHORT AND LONG on GBP/USD with 50% of traders holding both positions (as of this writing).
| Change in | Longs | Shorts | OI |
| Daily | 3% | 17% | 10% |
| Weekly | -5% | 12% | 3% |
EUR/GBP DAILY CHART
Chart prepared by Warren Venketas, IG
EUR/GBP on the other hand has been consolidating of recent with multiple doji candle closes indicative of indecision by traders, forming a rectangle pattern (blue). A breakout is looming and is likely to be catalyzed by the upcoming central bank decisions. The pair is attempting to come out of oversold territory (Relative Strength Index (RSI)) with some early signs of bullish divergence that could hint at an upside breakout. That being said, fundamentals point to more support for the UK and may extend the recent downtrend.
Key resistance levels:
- 200-day MA (blue)
- 0.8650
- 0.8600
Key support levels:
- 0.8549
- 0.8524
- 0.8500
BEARISH IG CLIENT SENTIMENT (EUR/GBP)
IG Client Sentiment Data (IGCS) shows retail traders are currently net LONG on GBP/USD with 74% of traders holding LONG positions (as of this writing).
| Change in | Longs | Shorts | OI |
| Daily | 16% | -3% | 9% |
| Weekly | -4% | 5% | -1% |
Contact and followWarrenon Twitter:@WVenketas
