**GBP/USD Price Forecast: Fundamental Backdrop Favors Bulls, Focus Remains on US NFP**
*Based on analysis by Warren Venketas, FXStreet*
—
The British pound (GBP) continues to draw attention in global currency markets as it maintains a buoyant trajectory against the US dollar (USD). The GBP/USD pair has been bolstered by a constellation of fundamental drivers, even as the financial world awaits the release of key US Nonfarm Payrolls (NFP) data. This comprehensive outlook examines the critical factors underpinning sterling’s strength and factors influencing its near-term prospects, building upon the insights provided in the original FXStreet article by Warren Venketas.
—
### Current GBP/USD Landscape
The GBP/USD pair has displayed resilience in the face of varying global economic currents, trading near multi-week highs and supported by both macroeconomic and policy factors:
– **Pair has climbed steadily** over recent sessions, oscillating within a bullish channel.
– The pound has outperformed expectations as **conflicting monetary policy signals** and economic indicators emerge from both the US and UK.
– Upcoming **US Nonfarm Payrolls (NFP)** data is positioned as a potential volatility catalyst for the pair.
### Key Fundamental Drivers
#### 1. UK Economic Resilience
One of the central factors bolstering the pound is the notable resilience in UK economic data:
– **December UK PMI figures topped expectations**, suggesting continued expansion in the services sector, the bedrock of the UK economy.
– The **labour market remains relatively tight**, with wage growth outpacing inflation, a dynamic that often brings wage-price spiral concerns to the fore.
– **CPI inflation in the UK**, though on a downtrend, remains above the Bank of England’s (BoE) 2 percent target, leading policymakers to maintain a relatively hawkish posture.
#### 2. Bank of England Stance
The BoE’s policy orientation remains a firm backdrop for the pound:
– **Hawkish rhetoric** from BoE officials persists, emphasizing the need to keep rates higher for longer to combat persistent inflation.
– While markets anticipate eventual loosening, **rate cut expectations have receded**, with swaps pricing in a first move later than previously forecast.
– **Governor Andrew Bailey and fellow MPC members** have reiterated concerns about inflation stickiness, contrasting with more dovish pivots seen at other G10 central banks.
#### 3. US Dollar Vulnerabilities
The greenback, meanwhile, faces its own headwinds:
– **Deterioration in US economic momentum** has become evident, with recent data showing softening across several fronts.
– December ISM Manufacturing and Services PMI both undershot market projections.
– The labor market, though still robust, shows warning signs of cooling.
– **Markets increasingly expect the Federal Reserve** to initiate an easing cycle by mid-2024, which has accelerated USD weakness.
– **US Treasury yields have tracked lower**, reinforcing pressure on the dollar across the board.
#### 4. US Nonfarm Payrolls Awaited
The impending NFP report represents a pivotal risk event:
– Markets are keenly focused on **wage growth and net employment change** for signs of labor market tightness or cooling.
– A softer-than-anticipated print may embolden expectations for a dovish Fed in 2024, exacerbating dollar declines and supporting GBP/USD upside.
– Conversely, any upside surprise could recalibrate aggressive easing bets, prompting near-term support for the greenback.
—
### Technical Analysis: GBP/USD
The bullish narrative for GBP/USD is also visible on the technical front:
– **Price action remains within a bullish channel**, and successive higher lows suggest robust buying interest.
– **Key levels to monitor**:
– **Support**: Previous lows near 1.2620–1.2650 zone.
– **Resistance**: Psychological zone at 1.2800 followed by 1.2890 (
Read more on GBP/USD trading.