GBP to USD Forecast: UK House Prices and Fed Speeches to Set the Tone Pre UK GDP Report

Highlights

• The GBP/USD declined by 0.28% on Monday, ending the session at $1.23433.
• Bank of England Chief Economist Huw Pill contributed to the Monday pullback.
• On Tuesday, UK house prices and Fed commentary warrant investor attention.

The Monday GBP/USD Overview

On Monday, the GBP/USD declined by 0.28%. After a 1.43% surge on Friday, the GBP/USD ended the day at $1.23433. The GBP/USD rose to a high of $1.24283 before falling to a low of $1.23380.

UK House Prices in Focus

On Tuesday, UK house prices will garner investor interest. The UK real estate is a litmus test of the UK economy. A deteriorating housing market could send recessionary signals. The elevated interest rate environment has pushed mortgage rates higher, impacting disposable income.

A deteriorating housing sector affects consumer confidence. The downward trend in disposable income and waning consumer confidence would impact private consumption.

UK private consumption contributes over 60% to the UK economy. A weaker consumption outlook could fuel recessionary fears.

Fed Speeches in the Spotlight

On Tuesday, Fed Vice Chair John Williams and FOMC voting members Christopher Waller, Lorie Logan, and Michael Barr are on the calendar to speak.

The markets are betting on the Fed ending its rate hike cycle, and on a June 2024 Fed rate cut. Hawkish comments on the US economic outlook, inflation, and interest rates could fuel demand for the US dollar.

According to the CME FedWatch Tool, the probability of a December Fed rate hike stands at 9.6%, up from 4.8% on Friday. Significantly, the chances of a June 2024 Fed rate cut have increased from 38.8% to 41.3%. FOMC members could influence investor sentiment toward the Fed rate path.

Short-Term Forecast

Near-term GBP/USD trends remain hinged on central bank speeches before the UK GDP Report. Hawkish Fed commentary could tilt monetary policy divergence back toward the US dollar. BoE Chief Economist Huw Pill floated an August 2024 rate cut on Monday.

GBP to USD Price Action

Daily Chart

The GBP/USD remained above the 50-day EMA while sitting below the 200-day, sending bullish near-term but bearish longer-term price signals.

If the GBP/USD moves through the 200-day EMA, it would give the bulls a run at the $1.24410 resistance level.

UK house prices and FOMC member speeches will be focal points on Tuesday.

A GBP/USD break below the 50-day EMA would support a move toward the $1.21216 support level.

The 14-period daily RSI reading of 58.28 indicates a GBP/USD break above the 200-day EMA before entering overbought territory.

4-Hourly Chart

The GBP/USD holds above the 50-day and 200-day EMAs, affirming bullish price signals.

A break above the $1.24410 resistance level would support a move toward $1.25.

Hawkish Fed commentary could send the GBP/USD below $1.23 and bring the EMAs and sub-$1.22 into view.

The 14-period RSI on the 4-hour chart, 61.33, indicates a GBP/USD move to the $1.24410 resistance level before entering overbought territory.