GBP/USD was treading water in the 1.3400 area during European trading hours on Wednesday. Other currency pairs have been very volatile in recent weeks. Right now, it is on the defensive, mirroring the indecisive mood of investors as they wait for key US economic indicators.
The British pound continues to be strong. It is barely able to get any traction as focus of market participants continue to turn towards incoming US economic data. Analysts think the upside for GBP/USD appears limited. This is mostly attributable to the forthcoming release of a number of important reports, including US jobs data, GDP numbers and PCE inflation. These four important data points are expected to be extremely influential on the currency pair.
In the early hours of trading, GBP/USD fluctuated but ultimately settled near the 1.3400 threshold, reflecting a period of consolidation amidst prevailing market uncertainties. Traders are right to be very attentive to developments. The US economic performance may create volatility in the currency pair.
The next US jobs report will be a big one, since it might be the report that fully reveals the state of our labor market’s health. If the jobs report impresses, this could push the US dollar up further, placing additional downside pressure on GBP/USD. On the other hand, softer employment data could reinforce the pound’s current strength.
Additionally, the atomic US GDP data is a key pivot point for investors’ eye. It provides the most broad-based picture of economic growth out there and can help shape decision-making around monetary policy. If GDP growth comes in stronger than they’re anticipating, that could send the dollar stronger too, further limiting any upside potential for GBP/USD.
Finally, the upcoming PCE inflation print will likely be a pivotal factor in turning market sentiment one way or the other. Inflation continues to be priority number one for central banks. Robust inflation prints could bolster expectations for tougher monetary policy in the US. This situation would probably be enough to blot any bullish sky for GBP/USD.
With such key economic releases on the horizon, market sentiment towards GBP/USD’s outlook is decidedly guarded. Analysts believe there is room to rise. They say such advances will be muted at least until the more crucial US data is released and assessed.