Key Takeaways
- GBP/USD is experiencing modest gains, trading around 1.3148, as market participants digest scarce economic data due to the ongoing US government shutdown.
- The US Dollar Index (DXY) remains poised to end the week with losses despite a recent recovery, currently at 99.45.
- Federal Reserve officials suggest a cautious approach to further rate cuts, citing the impact of the government shutdown on data availability.
- US consumer sentiment has significantly declined, with worries about the economic impact of the prolonged shutdown affecting outlooks.
- The technical outlook for GBP/USD suggests a potential for further weakness if key resistance levels are not breached.
GBP/USD Faces Headwinds Amid US Government Shutdown
The GBP/USD currency pair is holding onto minor gains on Friday. This stabilization occurs amidst a scarcity of economic data releases from the UK and as markets are processing limited economic information due to the persistent US government shutdown. The pair is currently trading at 1.3148, marking a 0.10% increase for the day, following a dip to an intraday low of 1.3094.
The U.S. Dollar has managed to recover some of its value throughout the week. However, it is still on track to finish the week with a net loss of 0.27%, as indicated by the US Dollar Index (DXY). The DXY, which tracks the dollar’s performance against a basket of six major currencies, is presently at 99.45, down from a six-month high of 100.36.
Federal Reserve Signals Cautious Stance on Rate Cuts
Federal Reserve officials provided insights on Friday regarding monetary policy. Vice-Chair Philip Jefferson stated that The Fed should proceed slowly with further rate cuts as policy approaches the neutral rate. He emphasized a meeting-by-meeting approach and highlighted a potential lack of government data due to the shutdown as a key consideration.
💡 Consumer sentiment in the United States has seen a notable decrease. The University of Michigan’s Consumer Sentiment Index for November fell to 50.3, down from 53.6 in October. The survey report indicated that With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy.
Inflation expectations for the one-year period have slightly increased, rising to 4.7% from 4.6%. Conversely, expectations for the five-year period have decreased, falling from 3.9% to 3.6%.
âš¡ The White House Economic Adviser Kevin Hassett communicated concerns to CNN, stating that the government shutdown is impacting the economy more severely than anticipated. He projected a reduction in GDP growth for the current quarter ranging from 1 to 1.5%.
GBP/USD Price Forecast: Technical Analysis
The technical outlook for GBP/USD suggests a cautious recovery, though the prevailing downtrend remains intact. This follows the pair’s significant drop below the 200-day Simple Moving Average (SMA), which is currently situated at 1.3261. While the Relative Strength Index (RSI) indicates an uptick in bullish momentum, buyers need to overcome the 1.3200 level and reclaim the 200-day SMA to regain control.
Conversely, a continuation of weakness could lead to a test of the current week’s low around 1.3020, with the significant psychological mark of 1.3000 likely to be the next target if downside pressure persists.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.39% | -0.16% | -0.57% | 0.42% | 1.14% | 2.06% | -0.03% | |
| EUR | 0.39% | 0.23% | -0.12% | 0.81% | 1.52% | 2.46% | 0.36% | |
| GBP | 0.16% | -0.23% | -0.52% | 0.58% | 1.29% | 2.22% | 0.13% | |
| JPY | 0.57% | 0.12% | 0.52% | 0.97% | 1.71% | 2.64% | 0.68% | |
| CAD | -0.42% | -0.81% | -0.58% | -0.97% | 0.65% | 1.61% | -0.44% | |
| AUD | -1.14% | -1.52% | -1.29% | -1.71% | -0.65% | 0.92% | -1.14% | |
| NZD | -2.06% | -2.46% | -2.22% | -2.64% | -1.61% | -0.92% | -2.05% | |
| CHF | 0.03% | -0.36% | -0.13% | -0.68% | 0.44% | 1.14% | 2.05% |
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/USD.
Final Thoughts
The GBP/USD is navigating a complex market environment influenced by the US government shutdown and cautious Fed sentiment. While the Sterling shows resilience, technical indicators suggest potential for further volatility. Market participants will be closely monitoring upcoming U.S. economic data releases as they become available.
