GBP to USD Forecast: British Pound Reflects UK Housing Woes and Jobs Market Tension

Highlights

• The GBP to USD saw a decline of 0.11% Friday but finished the week stronger at $1.27317.
• Adzuna UK Job Market Report reveals potentially shifting wage growth trends, hinting at labor market strains.
• The looming Jackson Hole Symposium causes a market divide.

Friday’s Overview

On Friday, the GBP to USD declined by 0.11%, ending the week up 0.31% to $1.27317. A bullish Friday morning saw the GBP/USD rise to an early high of $1.27660 before hitting the reverse. The reversal saw the GBP/USD fall to a low of $1.26891 as investors responded to the latest UK retail sales figures. However, afternoon support reduced the deficit.

UK House Prices Fall at a Sharper Pace

It is a quiet start to the week on the UK economic calendar. UK economic indicators ahead of the European opening bell gave investors reason to be cautious.

The Rightmove House Price Index declined by 1.9% in August year-over-year, following a 0.2% fall in July. Bank of England rate hikes have driven mortgage rates higher, leading to an increase in supply. Significantly, the upswing in mortgage rates has driven rents higher, delivering unwanted inflationary pressure.

Higher interest rates, mortgage rates, and falling house prices weigh on consumer sentiment and disposable incomes. The net effect is a tightening of the purse string, leading to a pullback in consumer spending. While this is a favorable outcome for the Bank of England looking to curb consumer demand-driven inflation, it paints a gloomier picture for the UK economy.

UK Jobs Market Report Reveals a Possible Shift in Wage Growth Trends

UK labor market statistics were also bearish this morning. According to the latest Adzuna UK Job Market Report,

• UK advertised vacancies fell by 1.1% in July. However, Adzuna attributed the decline to summer trends seen in previous years.
• Advertised salaries slipped by 0.15% month-on-month. Despite the fall, advertised salaries were up 3.7% year-over-year. However, advertised pay rates remain at the highest level since early 2021.
• Significantly, Adzuna noted that jobs advertised without salaries outnumbered jobs with listed salaries for the first time on record.
• The time to fill a position increased modestly from 34.6 days to 35.4 days (April), suggesting a degree of wage growth pressure through a lack of skilled labor. However, the average time to fill roles was down from April 2022 (43.1 days).

The latest jobs and housing market statistics will give the Bank of England more food for thought. A continued downtrend in vacancies, salaries, and time to fill roles would ease wage growth pressure and the need for more aggressive BoE monetary policy moves to curb spending.

The European Session

There are no UK economic indicators to draw interest this afternoon, leaving the markets to consider the upcoming monetary policy decisions and the Jackson Hole Symposium.

While the UK economic calendar was busier this morning, no Bank of England Monetary Policy Committee Members are on the calendar to speak today. The lack of scheduled speeches will leave BoE commentary with the media to draw interest.

Jackson Hole Symposium Uncertainty Remains a Test

It is a quiet start to the week on the US economic calendar. There are no US economic indicators to consider, leaving the Fed in focus.

Investors remain divided on whether the Fed will deliver one final interest rate hike before hitting the brakes. While economic indicators support a 25-basis point interest rate hike, another round of economic indicators could shift sentiment before the September FOMC meeting.

Dovish forward guidance ahead of the Jackson Hole Symposium and all-important Fed Chair Powell speech should support the GBP/USD pair. However, Fed Chair Powell will be hard-pushed to put a dovish spin on a hotter-than-expected US economy.

Central bank forward guidance that deviates from market bets will move the dial, leaving the GBP/USD susceptible to a breakout on dovish Fed commentary.

GBP to USD Price Action

Daily Chart

The Daily Chart showed the GBP to USD remained below the $1.2785 – $1.2862 resistance band. However, looking at the EMAs, the GBP to USD moved through the 50-day EMA and continued holding above the 200-day EMA, sending bullish near and longer-term price signals.

Looking at the 14-Daily RSI, 47.67 reflects bearish sentiment. The RSI signals a fall to sub-through the 50-day EMA to give the bears a run at $1.2650. However, a GBP to USD hold above the 50-day EMA would bring the lower level of the $1.2785 – $1.2862 resistance band and $1.28 into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD sits below the $1.2785 – $1.2862 resistance band. However, the GBP to USD remains above the 50-day EMA while hovering below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

The 14-4H RSI reading of 52.53 reflects moderately bullish sentiment, with buying pressure outweighing selling pressure. Significantly, the RSI aligns with the 50-day EMA, signaling a beak out from the 200-day EMA to target the $1.2785 – $1.2862 resistance band. However, a fall through the 50-day EMA would give the bears a look at sub-$1.2650.