GBP/USD Technical Analysis: Sterling Dollar and its Stability Warns of an Upcoming Strong Move – 07 March 2023
With the US dollar factors to one side, the pound is likely to benefit this week if the Chinese government announces any stimulus to support the pursuit of the more modest than-usual GDP growth target that was revealed at the opening of the annual meeting of the two sessions of lawmakers.
But with the British calendar devoid of high-profile economic data until Wednesday’s speech from the Bank of England’s Swati Dhingra, much about price action this week is likely to depend on the market’s appetite for the dollar and international factors such as developments in Washington and Beijing.
“A bullish surprise to UK GDP on Friday for January could also see some temporary volatility in GBP/USD based on reaction to February PMIs,” says Joseph Capurso, analyst at Commonwealth Bank of Australia.
The highlight of the week in the US will be Federal Reserve Chairman Jerome Powell’s Tuesday and Wednesday congressional appearances, but this is followed almost immediately by the January release of the JOLTS and the February Nonfarm Payrolls report. It will be closely scrutinized by the market given how much wage pressures from a tight labor market will drive Fed policy but with interest rates expected to rise sharply in late February, there is uncertainty about how much this data can help the dollar.
With the US dollar factors to one side, the pound is likely to benefit this week if the Chinese government announces any stimulus to support the pursuit of the more modest than-usual GDP growth target that was revealed at the opening of the annual meeting of the two sessions of lawmakers. But without a weaker US dollar and rising international risk appetite, the pound could struggle to advance much this week and risk another foray below the 1.20 psychological support after BoE policymakers eased market expectations on the bank rate last week.
For his part, Bank of England Governor Billy told the Brunswick newspaper a collective conference last Wednesday that “Inflation has been a little bit weaker, and activity and wages a little bit stronger, although I would like to stress a little bit in both cases”.
Another set of data will come ahead of our next monetary policy decision later this month.
“At this point, I would be careful not to suggest we are done with increasing the bank rate, or we will inevitably need to do more,” he added.