It is a quiet session for the GBP/USD. There are no material UK economic indicators for investors to consider today. The lack of stats will leave the GBP/USD in the hands of market risk sentiment ahead of the European session.
However, the Bank of England will be in focus during the European session. BoE Chief Economist Huw Pill will speak on the 2023 economic outlook. We expect plenty of market interest in today’s speech as investors assess the impact of the latest private sector PMI numbers and the Brexit deal on the BoE outlook and policy goals.
On Wednesday, Bank of England Governor Andrew Bailey disappointed the bulls, removing the certainty of another interest rate hike. The BoE Governor said, “At this stage, I would caution against suggesting that we are done with increasing Bank Rates or that we will inevitably need to do more. Some further increase in Bank Rate may be appropriate, but nothing is decided.”
When writing, the GBP/USD was down 0.18% to $1.20064. A mixed start to the day saw the GBP/USD rise to an early high of $1.20367 before falling to a low of $1.19977.
The Pound needs to move through the $1.2027 pivot to target the First Major Resistance Level (R1) at $1.2090. A move through the Wednesday high of $1.20887 would signal an extended breakout session. However, the Pound would need hawkish BoE chatter and weak US stats to support a breakout session.
In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2151. The Third Major Resistance Level sits at $1.2275.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1966 in play. However, barring a BoE-fueled sell-off, the GBP/USD should avoid sub-$1.19. The second Major Support Level (S2) at $1.1903 should limit the downside. The Third Major Support Level (S3) sits at $1.1779.
The US Session
Looking ahead to the US session, it is a relatively busy day on the US economic calendar. US jobless claims, unit labor costs, and nonfarm productivity numbers will be in focus. While nonfarm productivity numbers will draw interest, the jobless claims and unit labor costs will likely have more influence.
A further decline in initial jobless claims would fuel market bets of a more hawkish Fed monetary policy outlook. FOMC member Waller will speak after today’s stats. Investors will want to know how high the Fed will be willing to go.