During this week’s trading, the pound sterling is preferred over the US dollar due to the improved technical setup, the well-understood US rate cut repricing story, and month-end flows. The GBP/USD currency pair is stable around the 1.2688 level at the time of writing the analysis. As for the expected in the coming days, Friday is March 1st and we can see some opportunistic rallies in the GBP/USD exchange rate, as the month-end rebalancing is expected to see dollar selling after the strong performance of the US stock market in February.
Commenting on the performance and expectations, Valentin Marinov, a currency analyst at Credit Agricole Bank, said, “The end of next February may witness selling in US dollars by real money investors who are rebalancing their global stock portfolios.” In fact, months during which global stock markets rose typically saw the US dollar come under pressure at the end of the month on a daily basis. This is due to the rebalancing of hedging flows.”
According to recent trading, US markets continue to record all-time highs, supported by Magnificent Seven technology shares and Nvidia shares interested in artificial intelligence, which may lead to some good selling in the US dollar until the end of the month as portfolio managers rebalance currency exposure.
At the same time, technical considerations also support the bullish movements of the British pound in the near term: in this regard, says Roberto Milić, Forex analyst at UniCredit Bank, “The GBP/USD pair was able to recover again above the 1.2650 level, while keeping the return Testing the 1.27 resistance area. George Vesey, Forex analyst at Convera say, “GBP/USD appears to have found some decent support at its 50-week moving average and is showing signs of another move towards the top of its two-month range,”. Also, the analyst added that the 50-day moving average, at $1.2675, is the next upward barrier, after which the focus is on the 200-week moving average at $1.2850.
According to analysts at United Overseas Bank, “The upward momentum has increased slightly, and the GBP/USD pair is likely to rise towards the main resistance level at 1.2690.” ultimately, it is not clear at the moment whether the British pound will be able to break and stay above this level. Hence, the risk of the British pound rising towards the next major resistance level at 1.2735 is not the end.
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On the downside, analysts believe that a breach of the price of the GBP/USD currency pair to the level of 1.2600 only. Formerly, the “strong support” level at 1.2565” will mean that the upward risk has dissipated.
According to economic calendar data this week, there are no events outside of Britain that could disturb interest rates in the UK and the British pound. Nonetheless, the dollar was in the driver’s seat in 2024. The US dollar outperformed amid market expectations for fewer interest rate cuts by the US Federal Reserve this year, thanks to economic data releases that surpassed consensus and painted a picture of a strong economy.
Ultimately, we will need to see the incoming data beat expectations by a large margin if we want this trade to extend. The US Q4 2023 initial GDP will be released tomorrow, Wednesday, at 13:30 GMT. The consensus is expecting a reading of 3.3% year-on-year, unchanged from the previous quarter. This is the second revision (despite the “initial” tag it officially carries!) for this period and is unlikely to move the needle for the US dollar.
Meanwhile, on Thursday awaits the release of weekly job claims data, which provides insight into how the US labor market is progressing; We have seen some good reactions in the currency market in recent weeks to mistakes in either direction. However, the PCE inflation numbers are likely to attract the market’s attention because this is an inflation measure that the Fed is particularly interested in.
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