GBP/USD Forecast: Sterling’s Path to $1.27 Amid US Labor Market Uncertainty

Highlights

• The GBP/USD declined by 0.24% on Wednesday, ending the session at $1.25595.
• On Thursday, UK house prices and US labor market numbers will be focal points.
• US labor market stats will also draw investor interest before the US Job Report.

The Wednesday GBP/USD Overview

On Wednesday, the GBP/USD declined by 0.24%. After a 0.33% loss on Tuesday, the GBP/USD ended the day at $1.25595. The GBP/USD rose to a Wednesday high of $1.26137 before falling to a low of $1.25516.

UK House Prices in Focus

On Thursday, UK house prices will draw investor interest. A pickup in house prices would signal an improving demand environment, supporting consumer confidence. An upward trend in consumer confidence could fuel consumer spending and demand-driven inflation.

A higher outlook on inflation could force the Bank of England to maintain interest rates unchanged over a lengthier period.

Economists forecast the Halifax to report a 0.8% rise in house prices in November. In October, house prices were up 1.1%.

US Jobless Claims in the Spotlight

On Thursday, US jobless claims will garner investor interest. A larger-than-expected increase in jobless claims would support bets on a Q1 2024 Fed rate hike.

Deteriorating labor market conditions would ease wage growth and reduce disposable income. The net effect could be a pullback in consumer spending, dampening demand-driven inflation. A softer inflation outlook would allow the Fed to cut interest rates.

Economists forecast initial jobless claims to increase from 218k to 222k in the week ending December 2. The US dollar will likely be sensitive to the stats as investors consider the US Jobs Report (Fri).

Short-Term Forecast

Near-term trends for the GBP/USD will likely hinge on US labor market numbers and central bank chatter. Softer US labor market conditions would support a less hawkish Fed rate path. In contrast, a Bank of England commitment to delay rate cut discussions would tilt monetary policy divergence toward the Pound.

GBP to USD Price Action

Daily Chart

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

A GBP/USD return to $1.26500 would bring the $1.28013 resistance level into view.

UK house prices and US labor market stats are focal points.

However, a GBP/USD drop below the $1.25500 handle would support a fall to the $1.24410 support level and 50-day EMA. Buying pressure could intensify at $1.24400. The 50-day EMA is confluent with the $1.24410 support level.

The 14-period daily RSI reading of 54.74 indicates a GBP/USD move to $1.27 before entering overbought territory.

4-Hourly Chart

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

A GBP/USD break above the 50-day EMA would support a move toward the $1.28013 resistance level.

However, a fall to the $1.25000 handle would bring the 200-day EMA and the $1.24410 support level into play.

The 14-period RSI on the 4-hour Chart at 31.99 indicates a GBP/USD fall to the $1.25000 handle before entering oversold territory.