**Pound Sterling Forecast: Can GBP/USD Push Higher Before US GDP Data?**
*By Tim Clayton, currencynews.co.uk*
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**Overview**
The Pound Sterling (GBP) has demonstrated notable resilience, recently consolidating gains above the 1.2700 mark versus the US Dollar (USD). Market participants are now weighing up whether this trend can continue ahead of the forthcoming US GDP data release, a key economic indicator likely to filter through to global currency markets. The direction of GBP/USD in the coming days may hinge not only on the outcome of this US economic update but also on how UK data and Bank of England commentary shape investor expectations.
**Key Developments Supporting GBP/USD**
1. **Robust UK wage growth:**
– UK labor market data continues to show elevated wage inflation, a persistent concern for the Bank of England (BoE) and a buffer for Sterling demand. With average earnings growth parking well above the BoE’s target, traders have scaled back bets on imminent interest rate cuts.
2. **Hawkish BoE commentary:**
– BoE policymakers have adopted a cautious approach regarding loosening monetary policy, pointing to stubborn inflation pressures. The central bank is keen to see faster declines in services inflation before considering rate reductions, giving GBP solid underpinning.
3. **Improved global risk appetite:**
– Equity markets have rallied, boosting risk-sensitive currencies like Sterling. A “risk-on” mood has diminished safe-haven Dollar demand and helped global investors re-enter Sterling positions.
4. **Brexit trade friction developments:**
– The UK and EU have made limited progress on post-Brexit trade arrangements. While this remains a longer-term risk, there has been no significant deterioration recently, which removes downward pressure from the Pound.
**Short-Term GBP/USD Technical Analysis**
GBP/USD has edged higher, stabilizing above the psychologically significant 1.2700 level. Recent price action reflects:
– Support seen at 1.2650 and 1.2670, where buyers have re-emerged.
– Upside capped around 1.2800, with selling pressure increasing as the pair nears this resistance zone.
– Technical indicators such as the Relative Strength Index (RSI) are neutral to bullish, implying scope for further gains if key resistance is broken.
**Potential Catalysts for GBP/USD Movement**
Several themes could drive GBP/USD price action in the short term:
**1. UK economic data releases:**
– Consumer prices: Recent CPI readings are slowing, but remain above the BoE’s target. Any surprise acceleration, especially in core or services inflation, may fuel Sterling strength on expectations that the BoE will stay cautious.
– Flash PMIs: UK Purchasing Manager Indices have remained in expansion, but any deterioration would renew concerns about stagnation, undermining the Pound.
**2. US economic data (especially GDP):**
– US GDP: Markets are watching for Q2 GDP growth figures. A strong print could revive expectations for fewer Federal Reserve rate cuts, providing support to the Dollar and possibly reversing GBP/USD gains.
– US inflation: PCE and CPI data will also be crucial. Persistent US inflation could spur the Fed to remain hawkish longer, bolstering the Greenback.
– US labor market: Updates on jobless claims and non-farm payrolls will further influence the Fed’s stance and market direction.
**3. Central bank commentary:**
– BoE speeches: Any signals from key MPC members suggesting a reassessment of the timing or scale of future rate cuts could set the tone for GBP demand.
– Fed speakers: Markets remain vigilant for any shift in rhetoric about the outlook for US rates. More dovish language could undermine the Dollar and help GBP/USD extend higher.
**4. Geopolitical and risk dynamics:**
– Global equity trends: Continued risk-friendly sentiment would typically favor GBP over USD. Conversely, shocks or reversals in risk
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