The GBP/USD currency pair is experiencing significant volatility, driven by a confluence of global economic factors and financial market movements. The pair recently failed to sustain above the critical 100-day Simple Moving Average (SMA) at 1.2626, signaling potential challenges ahead. However, the market remains attentive to upcoming events, such as the European Central Bank's (ECB) monetary policy announcements, which could influence the Pound Sterling's trajectory. Meanwhile, global risk aversion sparked by slumps in major Wall Street stocks has revitalized safe-haven flows into the US dollar, further pressuring the GBP/USD pair.
Economic indicators and policy developments continue to play a pivotal role in shaping the GBP/USD outlook. The last line of defense for the pair is marked at the February 11 low of 1.2333, a critical support level that traders are closely monitoring. Additionally, interventions from a couple of Bank of England (BoE) officials scheduled this week could have implications for market sentiment.
Notably, renewed risk appetite has emerged following China's introduction of fresh rural revitalization measures, pushing the GBP/USD to over two-month highs of 1.2716. This optimism is further supported by hopes for a delay in tariff implementation on Canadian and Mexican goods. However, US President Donald Trump's confirmation of a March 4 enactment date for his proposed 25% tariffs on these goods has bolstered the US Dollar recovery.
US economic data adds another layer of complexity to the GBP/USD pair's dynamics. The second estimate of the fourth-quarter US Gross Domestic Product (GDP) remained steady at an annualized growth rate of 2.3% in Q4 2024. Meanwhile, the number of Americans filing for jobless benefits surged by 22,000 to 242,000 for the week ending February 22, marking a three-month high.
The corrective decline in the GBP/USD pair is mirrored by the declining 14-day Relative Strength Index (RSI), which is approaching the neutral 50 level. However, buyers may find some comfort in the confluence of the 50-day SMA and rising trendline support near 1.2450. On the upside, traders are eyeing significant resistance levels at the psychological barrier of 1.2850 and the round figure of 1.2900.
In this volatile environment, market participants are keenly awaiting key data releases and events that could provide direction for the GBP/USD pair. The US Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) is scheduled for release on Monday, offering traders additional insights into economic conditions that could impact currency movements.
The GBP/USD pair's inability to maintain its position above the 100-day SMA at 1.2626 indicates potential bearish sentiment in the market. As traders brace for ECB monetary policy announcements on Thursday, there is speculation about a "rub-off" effect on the Pound Sterling, potentially adding further pressure to the currency pair.
Meanwhile, a global slump in Nvidia and other "Magnificent Seven" mega-cap stocks has triggered risk aversion among investors. This shift in sentiment has prompted an influx of safe-haven flows into the US currency, exacerbating the downward pressure on GBP/USD. The February 11 low of 1.2333 now stands as a critical support level for traders to watch closely.
Upcoming speeches by BoE officials could also influence market dynamics this week. Their remarks may shed light on future monetary policy directions, affecting traders' expectations and strategies.
On a more positive note, China's recent rural revitalization measures have injected a dose of optimism into global markets, pushing GBP/USD to over two-month highs at 1.2716. Additionally, hopes for a delay in tariff implementation on goods from Canada and Mexico have contributed to market buoyancy.
However, these hopes were somewhat dampened by US President Donald Trump's confirmation that his proposed tariffs on Mexican and Canadian goods will take effect on March 4. This announcement has reinforced the US Dollar's recovery, placing additional pressure on the GBP/USD pair.
US economic indicators continue to shape market perceptions. The steady annualized growth rate of 2.3% in Q4 2024 GDP aligns with advance estimates, providing a stable economic backdrop. However, rising jobless claims, which increased by 22,000 to reach their highest level in three months at 242,000, signal potential challenges in the labor market.
The GBP/USD pair's corrective decline is reflected in technical indicators as well. The declining 14-day RSI is nearing the neutral level of 50, indicating a potential shift in momentum. Nonetheless, buyers may find some reassurance at around 1.2450, where both the 50-day SMA and rising trendline support converge.
Traders are also keeping an eye on significant resistance levels at 1.2850 and 1.2900. These topside barriers could prove challenging for any sustained upward movement in GBP/USD.