GBP/USD Ending the Year at the 200 Weekly SMA
GBP/USD fell from above 1.31 to 1.20 lows until October, but in the last few months of 2023, this pair has found strong demand again. Despite the UK economy’s worsening, we saw a reversal in November and the price has been steadily rising since then and it is closing the year heading toward 1.30. But, buyers have a major obstacle on the way which rejected the price yesterday.
However, the USD’s weakened which is keeping this pair optimistic, as it continues to make gains despite a lower inflation report last week. In the big picture though, the market is still readjusting for deeper global rate cuts next year, which has been dragging the USD down, as analysts expect FED cuts to be more front-loaded, while the BOE should start a little later. Fed fund futures are pricing in around 160 basis points of interest rate decreases.
GBP/USD Weekly Chart – Will Buyer Push Above the 200 SMA in January?
GBP/USD is overbought in fact
According to the inflation report released earlier this month, the November headline CPI dropped below 4%, and its components, such as food price inflation, fell as well. However, the Bank of England has tried to seem hawkish by leaving rate rise options open. This has been helping the GBP, with GBP/USD reaching 1.2839 yesterday, where it touched the 200 SMA (purple) on the weekly chart, which rejected the price and reversed lower, following more than 100 pips.
So, it seems like this pair will close 2023 below this moving average, unless we see some extraordinary bullish move later today, which is unlikely. However, analysts believe the Bank of England will not ease rates until Q3 2024, offering the GBP a good backdrop of higher real yields for a longer period of time and a strengthening economic momentum.
GBP/USD Live Chart
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