GBP to USD Forecast: Sterling Slides Amid UK Pound’s Macroeconomic Concerns

Highlights

• Thursday’s session saw GBP/USD descend 0.65%, concluding at $1.24081 after a brief high of $1.25062.
• While China’s economic indicators exceed expectations, GBP/USD remains influenced by the BoE’s stance.
• US Consumer Sentiment for September will shed light on spending trends; an uptick is eyed post robust indicators.

Overview of the Thursday Session

On Thursday, the GBP to USD pair fell by 0.65%. Following a 0.02% gain on Wednesday, the GBP/USD ended the day at $1.24081. The GBP/USD pair rose to a high of $1.25062 before falling to a low of $1.23963.

Macroeconomic Environment Remains Pound Negative

Recent UK economic indicators signal a deteriorating macroeconomic environment. A contraction in the UK services sector and a larger-than-expected fall in retail sales suggest weaker GDP numbers for August.

While weaker economic activity will take the pressure off the BoE to deliver more rate hikes, the debate over the timing of the first rate cut could pressure the GBP/USD further.

Economic indicators from China beat expectations, offering support to riskier assets this morning. The GBP/USD benefitted from the upbeat numbers. However, investors should monitor the news wires for Bank of England commentary. Dovish comments would reverse early gains.

US Consumer Confidence Will Have the Final Say

Michigan Consumer Sentiment figures for September will be in focus later today. After the better-than-expected US economic indicators on Thursday, a jump in consumer confidence would signal a continued uptrend in consumer spending.

Private consumption accounts for about 70% of the US economy. A pickup in consumer confidence would support consumption and service sector activity. It remains to be seen whether investors will continue to ignore the threat of further Fed rate hikes.

The uptrend in consumer spending would fuel demand-driven inflationary pressures. Higher interest rates would impact disposable income, curb spending, and ease demand-driven inflation.

Short-Term Forecast

Macroeconomic divergence favors the US dollar. Until there is a shift in sentiment toward the US economic outlook, the GBP to USD will likely remain under pressure in the near term.

GBP to USD Price Action

Daily Chart

The GBP/USD pair stayed below the $1.24410 resistance level and the 50-day and 200-day EMAs, sending bearish price signals. A break above the $1.24410 resistance level would support a GBP/USD move toward the 200-day EMA.

However, US consumer sentiment must deteriorate markedly for a GBP/USD break above the $1.24410 resistance level.

Failure to break above the resistance level would leave the $1.22150 support level in view.

The 14-period daily RSI reading of 33.55 shows the GBP/USD pair can fall to $1.23 before entering oversold territory.

4-Hourly Chart

The GBP/USD remains below the 50-day and 200-day EMAs, reaffirming bearish price near-term signals. A GBP/USD move through the $1.24410 resistance level would support a move toward the 50-day EMA.

However, failure to move through the resistance level would leave sub-$1.23 and the $1.22150 support level in view.

With a 34.35 reading on the 14-period 4-hourly RSI, the GBP/USD could fall to $1.2350 before entering oversold territory.