GBP/USD holds higher as rising December cut bets fuel Sterling demand
- GBP/USD rises as ISM Manufacturing contracts for the ninth consecutive month, reinforcing expectations for a Fed rate cut.
- Fed cut odds climb to 87.4% after soft employment components.
- BoE cut odds near 90% threaten Sterling’s momentum as key US and UK data loom this week.
The GBP/USD pair post modest gains, rising over 0.20% on Monday as investors grow confident that the Federal Reserve (Fed) might cut rates in the next week's meeting. Traders priced in a possible nomination of the White House Economic Adviser Kevin Hassett to succeed Chair Jerome Powell at the Fed. At the time of writing, the pair trades at 1.3250, after hitting a daily low of 1.3205.
Sterling advances in thin trading as weak US manufacturing data lifts rate-cut expectations
Data from the US showed that business activity contracted for the ninth straight month in November, according to the Institute for Supply Management (ISM). The ISM Manufacturing PMI dipped from 48.7 in October to 48.2 last month. The sub-component of employment dropped from 46 to 44, while Prices Paid jumped to 58.5 from 58, below forecasts of 59.5.
After the data, the CME FedWatch Tool showed that odds for a 25-basis-point rate cut by the Fed in December are at 87.4%, up from 86% last Friday. Consequently, the path of least resistance for GBP/USD is upwards.
Last week, Sterling rose by 1%, the largest since early August, boosted by Rachel Reeves' Autumn Budget. Seasonality figures showed that December is a strong month for Cable, according to LSEG data.
Nevertheless, money markets had priced in a 90% chance that the Bank of England (BoE) might cut rates at the December meeting. If the Fed pauses, which is a slim possibility, and the BoE cuts, this will exert downward pressure on the GBP/USD pair.
Ahead of this week, the US economic docket will feature the ADP Employment Change, the ISM Services PMI, Initial Jobless Claims and the Fed’s preferred inflation gauge release, the Core PCE. Across the pond, the UK schedule will feature S&P Global Flash PMIs
GBP/USD Price Forecast: Technical outlook
GBP/USD remains subdued, capped by key resistance levels, like the 50- and 200-day SMAs, around 1.3274 and 1.3312, respectively. Although momentum is bullish as depicted by the Relative Strength Index (RSI), buyers must clear 1.3315 and the 100-day SMA at 1.3369. Once those levels are taken out, 1.3400 would be up for grabs.
Conversely, if GBP/USD drops below 1.3200, the first support would be the 20-day SMA at 1.3145, ahead of 1.3100.
Pound Sterling Price Last 30 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 30 days. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.67% | 0.62% | -0.11% | 0.07% | 0.05% | 0.12% | |
| EUR | 0.54% | -0.14% | 1.19% | 0.47% | 0.59% | 0.59% | 0.66% | |
| GBP | 0.67% | 0.14% | 1.33% | 0.57% | 0.72% | 0.74% | 0.80% | |
| JPY | -0.62% | -1.19% | -1.33% | -0.78% | -0.60% | -0.60% | -0.56% | |
| CAD | 0.11% | -0.47% | -0.57% | 0.78% | 0.11% | 0.16% | 0.23% | |
| AUD | -0.07% | -0.59% | -0.72% | 0.60% | -0.11% | 0.00% | 0.08% | |
| NZD | -0.05% | -0.59% | -0.74% | 0.60% | -0.16% | -0.00% | 0.06% | |
| CHF | -0.12% | -0.66% | -0.80% | 0.56% | -0.23% | -0.08% | -0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
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