GBP/USD Falls Before Significantly Important US Data Release

GBP/USD falls face challenges due to sluggish UK wages. Eyes turn to influential US data. Market insights here.

On October 26, 2023, the GBP/USD pair struggled to gain positive momentum as the US dollar returned. The decline in sterling was triggered by slower-than-expected wage growth in the UK, prompting concerns among central banks about a potential wage-price spiral. Despite a marginal improvement in the job market and a slight reduction in the unemployment rate from 4.3% to 4.2%, the overall labor market conditions indicated a slowdown, indicating the impact of restrictive monetary policies on the economy and price pressures.

GBP/USD Falls Before Significantly Important US Data Release

Efforts to sustain bullish price movements faltered just below the 1.2345 mark, with GBP/USD now poised to test support levels at the previous swing low of 1.2039, potentially dropping to the psychological level of 1.2000. Given the absence of positive drivers, anticipating high-impact US data further dampened the pound’s prospects. Recent US data releases, such as the Non-Farm Payrolls (NFP) and retail sales figures, have shown positive surprises, suggesting a potential boost for the US dollar. 

The market anticipates resistance at 1.2200.

As reflected by retail trader data, market sentiment revealed a significant positioning divide, with 73.82% of traders net-long on GBP/USD. Contrarian analysis suggests a bearish outlook for GBP/USD, considering the prevailing sentiment and recent trends, indicating a potential further price decline.

Looking ahead, the focus of the markets shifted to vital economic events. At 13:30, analysts expected attention to turn to Q3 GDP data, revised upward from 4.1% to 4.3% in consensus estimates. A positive GDP print was likely to bolster the US dollar further, especially after a series of solid trading sessions. 

Additionally, analysts anticipated upcoming PCE inflation data on Friday to take center stage, following September’s US CPI data revealing persistent price pressures. Recent solid US data, including NFP and retail sales, heightened expectations for potential upside surprises, reinforcing the possibility of the Fed raising the Fed funds rate again.

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