- Investors await the speech of Federal Reserve Chairman Jerome Powell.
- Mixed economic data in the United States calendar provided no support for the US Dollar.
- BoE Pill: Expects inflation to fall in 2nd half of 2023 and rates to peak below market estimates.
- GBP/USD Price Analysis: To pull back towards 1.1800 before re-testing the 200 DMA.
The Pound Sterling (GBP) edges lower amidst a mixed sentiment as traders brace for the Federal Reserve (Fed) Chairman Jerome Powell’s speech, eyeing to get some signs of his current posture about interest rates. Also, a busy economic calendar in the United States (US) failed to support the US Dollar (USD). At the time of writing, the GBP/USD is trading at 1.1942 after hitting a daily high of 1.2029.
Federal Reserve Chair Jerome Powell eyed around 18:30 GMT
Sentiment remains fragile, as shown by US equities wavering. Latest Federal Reserve officials commented that the US central bank is ready to moderate the pace of rate hikes but also stated that rates would end higher than September projections. Even the St. Louis Fed President James Bullard commented that the Fed is “ways to go to a restrictive policy,” added that the Fed needs to increase rates until 2023 and foresees the Federal Funds rate (FFR) peaking at around 5% to 7%. Nonetheless, the markets are underpricing Fed policymakers. So any hawkish tilt remarks by Jerome Powell could rock the boat and bolster the US Dollar.
Dismal ADP Employment report kept the US Dollar defensive
Data-wise, the ADP Employment Change report for November disappointed investors as the economy added just 127K jobs below expectations and trailed the 239K employees hired by private companies in October. Nela Richardson, the Chief Economist at ADP, said the November report suggests that the Federal Reserve’s aggressive policy “is having an impact on job creation and pay gains.”
Economy in the United States in Q3 grew above estimates
Elsewhere, the US Gross Domestic Product (GDP) for the third quarter, on its second estimate, increased by 2.9% above forecasts of 2.7%, smashing Q3’s advanced reading of 2.6%. Even though the report sent recession speculations in the United States to the trash can, it failed to bolster the US Dollar, with the GBP/USD remaining trading in the green, well below the daily high of 1.2024.
BoE’s Chief Economist Huw Pill foresees rates to peak lower than the market’s projections
The UK economic docket featured the Bank of England (BoE) Chief Economist Huw Pill. He said inflation is expected to fall quickly in the second half of 2023 while supply chain issues are being solved. Regarding the Bank’s Rate peak, he said that the BoE is expected to hike rates, lower than money market futures expectations of 5.25%. Pill echoed the BoE’s Governor Andrew Bailey’s remark on foreseeing a lower peak for the bank rates at their last monetary policy meeting. Therefore, further GBP weakness is expected.
GBP/USD Price Analysis: Technical outlook
From a daily chart perspective, the GBP/USD remains neutral-to-upward biased once the major could not crack the 200-day Exponential Moving Average (EMA) around 1.2157. Of note, after printing a daily high of 1.2029, shy of the week’s high of 1.2117, the Pound Sterling has fallen sharply, registering fresh weekly lows around 1.1941. The Relative Strength Index (RSI) aims downwards, albeit in bullish territory, suggesting buying pressure is waning. So in the near term, the GBP/USD might pull back before resuming upwards. Therefore, the GBP/USD first support would be the 1.1900 figure. A breach of the latter will expose the November 23 daily low at 1.1872, ahead of the November 21 swing low of 1.1762.