**GBP/USD Price Forecast: Sterling Balances at 1.35 Ahead of Fed, Jobs Data**
*Original reporting by Trading News staff*
The British pound (GBP) has been at the forefront of forex headlines as it navigates a precarious path against the US dollar (USD). Anchored near the 1.35 mark, sterling finds itself at a critical juncture, teetering between bullish optimism and the threat of further depreciation. Market participants are casting a wide net of analysis as both the Federal Reserve (Fed) policy outlook and US labor market data threaten volatility in the near term.
As we head into a confluence of high-impact events, trading in GBP/USD has been characterized by cautious range-bound movement. Both technical indicators and macroeconomic factors suggest that the coming week could be pivotal for the next major move in this major currency pair.
### Current Market Context
– **GBP/USD Consolidation**: The pair currently trades near the psychological 1.35 level, a fulcrum point that has served alternately as resistance and support in recent months.
– **Dollar Strength vs Sterling Resilience**: The US dollar has broadly benefited from higher Treasury yields and growing anticipation of monetary tightening. However, sterling has displayed relative strength, underpinned by the Bank of England’s (BoE) hawkish guidance and domestic growth momentum.
### Fed Policy Outlook Looms Large
Markets are firmly focused on the Federal Reserve’s upcoming policy communications. The expectation of interest rate hikes remains a dominant force in FX markets, with the timing and pace of normalization continuing to fuel volatility.
– **Hawkish Shift**: Recent commentary from key Fed officials has signaled readiness to tighten policy in response to persistently high inflation. The market is now pricing in multiple hikes commencing this year.
– **Balance Sheet Reduction**: In addition to rate increases, discussion around the Fed’s plan to reduce its $9 trillion balance sheet adds another layer of complexity.
– **Impact on the Dollar**: The US dollar typically benefits from higher yields and prospects of monetary tightening, as foreign capital seeks improved returns.
For the GBP/USD, the road ahead is directly tied to the interplay between the Fed’s tightening path and the BoE’s own policy normalization.
### US Jobs Report: The Key Data Catalyst
The imminent US nonfarm payrolls report is widely regarded as the next critical catalyst for GBP/USD. Labor market strength or weakness can decisively shift expectations around the timing and size of Fed rate increases.
– **Strong Jobs Growth** would likely reaffirm the Fed’s hawkish stance, buoying the greenback and pressuring GBP/USD lower.
– **Disappointing Numbers** could cast doubt on the pace of tightening, weakening the dollar and supporting a rebound in GBP/USD.
Key metrics to watch in the jobs report include:
– Nonfarm payrolls change
– Unemployment rate
– Average hourly earnings
These figures hold the power to spark rapid, decisive movements as traders recalibrate interest rate expectations.
### Sterling’s Domestic Drivers
While the US calendar is packed with high-impact events, sterling remains acutely sensitive to domestic developments. The main supports and risks for the pound in the coming sessions include:
#### Supportive Factors
– **Bank of England Rate Hike Expectations**: The BoE has signaled that further increases may be warranted, following the initial rate hike in December. Forward guidance from policymakers continues to lean hawkish.
– **Economic Resilience**: Strong UK data, particularly in services and labor markets, has reassured investors about the ongoing recovery.
– **Relative Stability in Domestic Politics**: Although risks persist, the lack of dramatic policy surprises has limited sterling’s downside.
#### Headwinds
– **Rising Inflationary Pressures**: While supporting BoE hikes, high inflation weighs on consumer spending and economic optimism.
– **Brexit-Related Risks**: Tensions over trade protocols and the Northern Ireland border remain tail risks for GBP sentiment.
### Technical
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