GBP to USD Forecasts: The UK Autumn Statement and US Economic Data in Focus

Highlights

• The GBP/USD gained 0.27% on Tuesday, ending the session at $1.25378.
• The UK Treasury Select Hearing on the November Monetary Policy Report and the FOMC Meeting Minutes delivered gains for the GBP/USD.
• On Wednesday, the Autumn Statement and US economic indicators will be focal points.

The Tuesday GBP/USD Overview

On Tuesday, the GBP/USD rose by 0.27%. Following a 0.41% gain on Monday, the GBP/USD ended the day at $1.25378. The GBP/USD fell to a low of $1.24954 before rising to a session high of $1.25591.

UK Autumn Statement in the Spotlight

On Wednesday, CBI Industrial Trend Orders for November will draw investor interest. Better-than-expected numbers could offer GBP/USD price support. However, the UK manufacturing sector accounts for less than 30% of the UK economy. While likely to draw interest, the report is unlikely to influence the Bank of England and its monetary policy goals.

The UK Autumn Statement will influence the buyer appetite for the Pound. Significantly, the Bank of England must consider government fiscal measures in policy decisions. Possible measures include tax cuts and adjustments to benefits. Tax cuts could fuel the buying appetite for the GBP/USD.

Tax cuts increase disposable income, countering BoE efforts to curb spending through rate hikes. An upward trend in disposable income could fuel consumer spending and demand-driven inflation. For the UK Government, tax cuts would support the economy. UK private consumption contributes over 60% to the UK economy.

Speaking to the BBC on Sunday, Chancellor of the Exchequer Jeremy Hunt did not rule out tax cuts.

US Jobless Claims and Consumer Sentiment in Focus

On Wednesday, US economic indicators warrant consideration. Durable goods orders, jobless claims, and Michigan Consumer Sentiment figures will garner investor interest. However, jobless claims and the Michigan Consumer Sentiment Report will likely attract more attention from the Fed.

A rise in jobless claims and a downward revision to consumer sentiment could support bets on a May Fed rate cut. A weakening labor market and waning consumer sentiment would signal a pullback in consumer spending. Downward trends in consumer spending ease demand-driven inflationary pressures and the need for a hawkish rate path.

Economists forecast initial jobless claims to fall from 231k to 225k in the week ending November 18. According to preliminary figures, the Michigan Consumer Sentiment Index declined from 63.8 to 60.5 in November.

Short-Term Forecast

Near-term GBP/USD trends could depend upon the Autumn Statement and economic indicators in the second half of the week. If the UK Government announces tax cuts or other measures to fuel consumption, the BoE may need to delay rate cuts. A delay in rate cuts beyond H1 2024 would tip monetary policy divergence toward the Pound and fuel the buyer demand for the GBP/USD.

GBP to USD Price Action

Daily Chart

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

A GBP/USD break above $1.25500 would support a move toward the $1.28013 resistance level.

The Autumn Statement and US economic indicators are focal points for the Wednesday session.

However, a GBP/USD fall to sub-$1.25 would bring the $1.24410 support level into play.

The 14-period daily RSI reading of 65.94 suggests a GBP/USD return to $1.26 before entering overbought territory.

4-Hourly Chart

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

A move through $1.25500 would give the bulls a run at the $1.26 handle.

However, a fall through the $1.25 handle would bring the $1.24410 support level into play.

The 14-period RSI on the 4-hour Chart at 69.15 suggests a GBP/USD move to $1.25500 before entering overbought territory.