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Overview of the Wednesday Session
The GBP/USD gained 0.47% on Wednesday. Reversing a 0.08% loss from Tuesday, the GBP/USD pair ended the day at $1.21333. The GBP to USD pair fell to a low of $1.20371 before reaching a high of $1.21767.
The UK construction PMI for September will draw investor interest on Thursday. Economists forecast the PMI to fall from 50.8 to 49.9. A larger-than-expected fall will likely test buyer appetite for the Pound.
The UK construction industry contributes less than 10% to the UK economy. However, a deteriorating housing sector environment will likely impact consumer confidence. A downward trend in consumer confidence may weigh on consumer spending, adversely affecting the UK economy. UK private consumption accounts for more than 60% of the UK GDP.
Beyond the economic indicators, Bank of England commentary also warrants consideration. Monetary Policy Committee member Ben Broadbent is on the calendar to speak today. Comments relating to the UK economy, inflation, and monetary policy will move the dial. Broadbent will be a panelist at the ECB Conference on Monetary Policy.
US Initial Jobless Claims and Fed Speeches in Focus
Later today, US initial jobless claims will garner investor interest. US labor market indicators delivered mixed signals this week. Job openings unexpectedly surged in August. However, the ADP reported a significantly lower rise in nonfarm employment in September.
The contrasting reports will likely increase sensitivity to the US jobless claims. Economists forecast initial jobless claims to increase from 204k to 210k.
A deterioration in labor market conditions would ease wage growth pressures and weigh on disposable income. Downward trends in disposable income would curb consumer spending and ease demand-driven inflationary pressures. A weaker outlook on consumption could also soften pressure on the Fed to maintain a hawkish Fed rate path.
However, FOMC member commentary also needs consideration today. FOMC members Thomas Barkin, Michael Barr, Mary Daly, and Loretta Mester are on the calendar to speak today. FOMC member reaction to the ADP and jobless claims reports will draw investor interest.
Short-Term Forecast
Monetary policy divergence remains tilted in favor of the US dollar. However, US labor market reports are challenging bets on a hawkish Fed rate path. US jobless claims numbers later today and the US Jobs Report on Friday will likely dictate near-term trends. Weaker-than-expected numbers could support a GBP/USD move toward $1.23.
GBP to USD Price Action
Daily Chart
The GBP/USD pair remained below the 50-day and 200-day EMAs, affirming bearish price signals. Significantly, the 50-day EMA crossed through the 200-day EMA, signaling further losses.
An unexpected rise in the UK construction PMI and a spike in US jobless claims would support a GBP/USD break above the $1.22150 resistance level.
However, steady jobless claims and hawkish Fed comments would bring the $1.19055 support level into view.
The 14-period daily RSI reading of 32.70 supports the GBP/USD fall below $1.21 before entering oversold territory.
4-Hourly Chart
The GBP/USD remains below the 50-day and 200-day EMAs, reaffirming bearish price signals. A GBP/USD break above the 50-day EMA would support a move to the $1.22150 resistance level.
However, a drop below $1.21 would bring the $1.19055 support level into view.
With a 52.40 reading on the 14-period 4-hourly RSI, the GBP/USD can return to $1.22 before entering overbought territory.
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