GBP/USD Outlook: Currency Pair of the Week – November 11, 2024

• US CPI and UK GDP to influence GBP/USD outlook this week
• US dollar remains resilient amid strong data and optimism for growth after Trump’s victory
• GBP/USD technical analysis points lower

US dollar remains on front-foot as confidence in growth increases

Last week was a big one for the financial markets, and this one has started the way last one ended. Despite predictions of a close race, Donald Trump secured a sweeping victory, with Democrats taking most of the swing states and achieving a decisive win. This helped to fuel a rally in stocks, cryptos and the dollar, with the latter fuelled further by resilient economic indicators. As a result, the GBP/USD outlook has remained bearish.

Last week saw a jump in consumer sentiment data (University of Michigan), rising to 73.0 from the prior 70.5 reading, indicating rising optimism. This boost in confidence, alongside the market’s reaction to the political developments and the Fed’s 25 basis points rate cut, has kept the dollar strong. The Fed Chair remained tight-lipped on future policy, but markets know that fiscal expansion might limit further rate cuts. These factors are keeping investor sentiment toward the dollar largely positive. With investors anticipating tax cuts and infrastructure spending from the government, the dollar found solid ground, pulling the GBP/USD pair below the 1.29 level despite initial post-election selling pressure.

BoE’s Gradual Approach Offers Little Support to GBP/USD

Last week, we also heard from the Bank of England. It followed suit with a 25 basis points rate cut but adopted a more reserved tone. BoE Governor Bailey emphasised a “gradual” approach to future rate adjustments, without detailing what that might entail. While the pound briefly benefited from the Fed’s rate cut and a momentary dip in the dollar, Friday’s trading quickly reverted as dollar strength resumed. This pullback has once again applied pressure to the GBP/USD outlook, leaving traders cautious. For now, the BoE’s slower pace and its limited willingness to implement further drastic cuts are unlikely to provide significant support for the pound against a robust dollar.

Key Economic Data Ahead: Focus on US CPI and UK GDP

This week, inflation data from the US and GDP data from UK will be crucial. With last month’s US CPI outpacing expectations at 2.4% year-over-year, markets remain attentive to signs of persistent inflation. The upcoming CPI release on Wednesday could further support the dollar if it indicates rising price pressures, given that high inflation might deter the Fed from further loosening its monetary policy.

On the UK side, Thursday’s GDP data is expected to shed light on the current state of the economy. The impact of recent budget, predicted to contribute marginally to inflation without spurring substantial growth, has been largely shrugged off. A stronger-than-expected GDP reading could provide some short-term support for the pound, though it may not be enough to turn the overall GBP/USD outlook bullish.

Here’s the full economic calendar relevant to the GBP/USD pair this week:

Technical GBP/USD Outlook: Downside Risks Persist

Source: TradingView.com

Technically, the GBP/USD remains under pressure, with significant resistance near the 1.30 mark holding firm last week. After breaking below this level, the pair has struggled to find renewed strength. The technical outlook thus remains bearish, barring the formation of a major bullish reversal pattern. Around the 1.2780–1.2870 range, which serves as critical support. This is where the 200-day moving average converges with prior support. Should this zone fail, attention may shift to the August low of 1.2665.

For now, the GBP/USD outlook favours a continued bearish stance as the pair struggles to regain momentum amid ongoing dollar strength.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R