• GBP/USD has been struggling to gather recovery momentum.
  • BOE's gloomy economic outlook is not allowing the British pound to find demand.
  • Dollar selloff pauses ahead of the US July jobs report.

After having declined to its lowest level in nearly a week at 1.2065 on Thursday, GBP/USD has staged a rebound and settled above 1.2100. Nevertheless, the pair could find it difficult to gather further recovery momentum following the Bank of England's (BOE) remarks on the economic outlook.

As expected, the BOE hiked its policy rate by 50 basis points to 1.75% at its August policy meeting. The bank, however, noted that it was now projecting to the UK economy to go into recession in the fourth quarter of the year and continue to contract throughout 2023. Commenting on the policy outlook, "50 bps rate rise today does not mean we are now moving to a pre-determined path of raising rates by 50 bps per meeting," BOE Governor Bailey said and added that all options were on the table for the September meeting and beyond.

The sterling came under heavy selling pressure during the BOE event and caused GBP/USD to fall sharply. The fact that the pair's ensuing rebound was fueled by the broad dollar weakness rather than the pound strength suggests that it could quickly turn south on dollar-positive market developments.

Later in the day, the July jobs report from the US will be watched closely by market participants. Analysts expect Nonfarm Payrolls (NFP) to rise by 250,000. A stronger-than-forecast NFP print coupled with a strong wage inflation figure could help the dollar outperform its rivals and weigh on GBP/USD.

On the flip side, the greenback could have a tough time attracting investors if investors continue to scale down 75 bps September Fed rate hike bets on a disappointing labor market report. Nevertheless, GBP/USD's potential gains should be capped by significant technical levels in that scenario.

GBP/USD Technical Analysis

GBP/USD faces immediate hurdle at 1.2160 (Fibonacci 23.6% retracement of the latest uptrend, 20-period SMA on the four-hour chart). Above that level, the ascending trend line forms key resistance at 1.2200. Only a daily close above that level could be seen as a bullish development and open the door for an extended rebound toward  1.2275 (the end-point of the uptrend).

On the downside, sellers could take action if 1.2100 (psychological level, Fibonacci 38.2% retracement) support fails. In that case, 1.2075 (200-period SMA) could be seen as the next bearish target before 1.2050 (100-period SMA) and 1.2030 (Fibonacci 50% retracement). 

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content

Recommended Content

Editors’ Picks

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD extends slide toward mid-1.0200s after US data

EUR/USD continues to decline toward 1.0250 during the American trading hours on Friday. After the data published by the UOM showed that the long-run inflation outlook rose to 3% in August from 2.9% in July, the dollar gathered strength against its rivals, weighing on the pair.


GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD pushes lower 1.2100 on broad dollar strength

GBP/USD is trading deep in negative territory near 1.2100 during the American session on Friday. With the UoM's Consumer Sentiment Survey pointing to a modest increase in the long-run inflation outlook, the US Dollar Index extended its rally, reflecting a broad dollar strength.


Gold clings to modest gains above $1,790

Gold clings to modest gains above $1,790

Gold stays relatively resilient on Friday and trades modestly higher on the day above $1,790. Although the greenback continues to outperform its rivals on the latest US data, falling US Treasury bond yields help XAU/USD hold in positive territory.

Gold News

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shiba Inu ready to go ballistic: Shiba Eternity released in Vietnam

Shytoshi Kusama, the project leader of Shiba Inu announced the launch of Shiba Eternity for Vietnamese players. The game is available for testing and the team has asked users for their review. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!