GBP/USD Outlook: Sideways Above 1.3500 Ahead of Key Events
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- The GBP/USD currency pair is trading sideways in Asia as markets, consolidating ahead of this week’s catalysts.
- Currency markets may be affected by UK GDP and US CPI.
- Technically, the bearish momentum remains dominating.
The GBP/USD outlook remains largely neutral to bearish as the UK’s data is expected to be downbeat while the post-NFP jitters continue to weigh.
Following a fall below 1.3500 in European markets before recovering to 1.3535, the GBP/USD price traded flat for the session between 1.3520 and 1.3540. As the markets digested last week’s events and awaited the next catalyst, it was one of those early weeks with no momentum.
Following last week’s surprise hawkish announcement from the European Central Bank and US Nonfarm Payrolls report, the US dollar fell, and the euro and the pound rose. In the event of rising inflation risks, the ECB may hike rates later in 2022. However, despite market expectations, President Christine Lagarde told the European Parliament during a hearing that there was no need for serious monetary tightening. She predicted that inflation would fall and stabilize around the ECB’s target of 2%.
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According to nonfarm payroll data released on Friday, the number of jobs created in the United States in January was unexpectedly higher. The dollar was initially supported by the event, but it soon faded away at the close to moving sideways at the start of this week.
Markets will focus on the US CPI in the coming week, scheduled for Thursday. Regarding the pound’s domestic outlook, UK’s gross domestic product is considered a potential catalyst. TD Securities analysts project a 0.8% m/m contraction in the UK GDP in December, pushing GDP below pre-COVID-19 levels.
Manufacturing is expected to have shrunk 0.3%m/m. In contrast, the services sector will shrink by 0.9%m/m, both due to voluntary COVID measures and the rise of Omicron, as well as lower consumer demand.
GBP/USD price technical outlook: Bears to dominate
The GBP/USD price finds mild support around the confluence of 50-period and 200-period SMAs on the 4-hour chart. Meanwhile, the 1.3500 handle also limits the downside potential. However, the outlook is not quite promising. The price is still below the 20-period SMA, and the two upthrust bars exert downside pressure.
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Therefore, it is prudent to wait for a breakout of 1.3500 or 1.3570 to find a valid trading opportunity. We expect the market to range between 1.3490 to 1.3550.
