GBP/USD Forecast: Eyeing 1.32 as Bailey balks at negative rates, dollar weakness set to resume
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- GBP/USD has hit the highest since March amid an upbeat message from the BOE.
- US jobless claims, fiscal stimulus talks and Non-Farm Payrolls tensions are in play.
- Thursday's four-hour chart is pointing to room for more gains.
Not ruling out, but not now – the negative message on sub-zero borrowing costs is boosting the pound. Andrew Bailey, Governor of the Bank of England, has told reporters not to think that the BOE is about to use negative rates, following other positive developments in the bank's "Super Thursday."
The BOE reduced its contraction forecast for 2020 to -9.5% from 14% beforehand and also noted that high-frequency indicators are pointing to robust spending. While the bank refrained from hinting about new bond-buying and repeated that risks are skewed tot he downside, Bailey and his colleagues are seeing the glass half full.
More BOE Quick Analysis: Three pound-positive on Super Thursday open door to new highs
GBP/USD has hit 1.3183, the highest since March, and is holding onto most of its gains.
Cable is defying the dollar's attempt to recover from two blows on Thursday. ADP's jobs report showed a meager gain of 167,000 jobs, much lower than 1.5 million expected. The employment gauge of the ISM Non-Manufacturing Purchasing Managers' Index pointed to weak hiring in the services sector.
The focus now shifts to jobless claims, which are projected to fall after a worrying increase beforehand. The high-frequency weekly figures will add to jitters ahead of Friday's all-important Non-Farm Payrolls. Did the US lose jobs in July? The chances are rising, and analysts may downscale their forecasts.
See:
- US Initial Jobless Claims: Can claims and payrolls rise at the same time?
- US Non-Farm Payrolls Preview: A dual-track labor market or imperfections in the data?
President Donald Trump has threatened to use an executive order to extend federal unemployment claims – a key program that has kept consumption upbeat in the wake of coronavirus. His move comes as Democrats and Republicans remain divided on the next fiscal boost. Markets are pricing in a large package, seeing through politicians' blame-game.
Further developments in Washington and updated coronavirus figures are eyed later in the day. The COVID-19 curves have begun bending lower in America, yet remain elevated.
UK coronavirus cases are grinding higher, with the Scottish administration slapping new restrictions on Aberdeen. The northern oil hub joins Leicester, Manchester, and other areas that have suffered setbacks. For now, the focus is on the BOE and not on COVD-19, nor on US-UK trade talks. Negotiations continue, but expectations for an accord this year remain slim.
Overall, it seems that the backwind from the BOE could continue pushing the pound higher, especially if the dollar fails to receive good news.
GBP/USD Technical Analysis
The Relative Strength Index on the four-hour chart is still below 70 – outside overbought conditions and allowing bulls to squeeze more gains. Momentum remains positive and pound/dollar is holding above the 50, 100, and 200 Simple Moving Averages.
Above the fresh high of 1.3183, the next barrier is 1.32 – March's high. Further above, 1.3270 and 1.3320 are eyed.
Support awaits at 1.3110, the daily low, followed by 1.3055, a stepping stone on the way up. Next, 1.2980 and 1.2905 are eyed.
- GBP/USD has hit the highest since March amid an upbeat message from the BOE.
- US jobless claims, fiscal stimulus talks and Non-Farm Payrolls tensions are in play.
- Thursday's four-hour chart is pointing to room for more gains.
Not ruling out, but not now – the negative message on sub-zero borrowing costs is boosting the pound. Andrew Bailey, Governor of the Bank of England, has told reporters not to think that the BOE is about to use negative rates, following other positive developments in the bank's "Super Thursday."
The BOE reduced its contraction forecast for 2020 to -9.5% from 14% beforehand and also noted that high-frequency indicators are pointing to robust spending. While the bank refrained from hinting about new bond-buying and repeated that risks are skewed tot he downside, Bailey and his colleagues are seeing the glass half full.
More BOE Quick Analysis: Three pound-positive on Super Thursday open door to new highs
GBP/USD has hit 1.3183, the highest since March, and is holding onto most of its gains.
Cable is defying the dollar's attempt to recover from two blows on Thursday. ADP's jobs report showed a meager gain of 167,000 jobs, much lower than 1.5 million expected. The employment gauge of the ISM Non-Manufacturing Purchasing Managers' Index pointed to weak hiring in the services sector.
The focus now shifts to jobless claims, which are projected to fall after a worrying increase beforehand. The high-frequency weekly figures will add to jitters ahead of Friday's all-important Non-Farm Payrolls. Did the US lose jobs in July? The chances are rising, and analysts may downscale their forecasts.
See:
- US Initial Jobless Claims: Can claims and payrolls rise at the same time?
- US Non-Farm Payrolls Preview: A dual-track labor market or imperfections in the data?
President Donald Trump has threatened to use an executive order to extend federal unemployment claims – a key program that has kept consumption upbeat in the wake of coronavirus. His move comes as Democrats and Republicans remain divided on the next fiscal boost. Markets are pricing in a large package, seeing through politicians' blame-game.
Further developments in Washington and updated coronavirus figures are eyed later in the day. The COVID-19 curves have begun bending lower in America, yet remain elevated.
UK coronavirus cases are grinding higher, with the Scottish administration slapping new restrictions on Aberdeen. The northern oil hub joins Leicester, Manchester, and other areas that have suffered setbacks. For now, the focus is on the BOE and not on COVD-19, nor on US-UK trade talks. Negotiations continue, but expectations for an accord this year remain slim.
Overall, it seems that the backwind from the BOE could continue pushing the pound higher, especially if the dollar fails to receive good news.
GBP/USD Technical Analysis
The Relative Strength Index on the four-hour chart is still below 70 – outside overbought conditions and allowing bulls to squeeze more gains. Momentum remains positive and pound/dollar is holding above the 50, 100, and 200 Simple Moving Averages.
Above the fresh high of 1.3183, the next barrier is 1.32 – March's high. Further above, 1.3270 and 1.3320 are eyed.
Support awaits at 1.3110, the daily low, followed by 1.3055, a stepping stone on the way up. Next, 1.2980 and 1.2905 are eyed.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.