Investor interest in the UK will be drawn to retail sales data on Friday. Analysts are predicting a decrease of 0.3% in February following a surge of 3.4% in January. If spending continues to rise, it could lead to demand-driven inflation and support the sentiment towards the Bank of England holding steady in 2024.
On Tuesday, the focus shifts to the US housing sector data, which serves as a leading indicator of the US economy. A decline in the housing sector environment could impact consumer confidence and spending, with a potential threat of a hard landing. Economists are expecting housing starts to surge by 7% in February after a 14.8% decline in January, while building permits are forecasted to fall by 0.2%.
Fed Interest Rate Decision and FOMC Economic Projections on Wednesday
Wednesday will see the Federal Reserve’s interest rate decision, FOMC Economic Projections, and Fed Press Conference come into play. Recent inflation figures have diminished expectations for an H1 2024 Fed rate cut. All of these events could have a significant impact on the US dollar in the near term, with economists expecting the Fed to maintain interest rates at 5.5%.
Thursday will bring attention to the Philly Fed Manufacturing, private sector PMIs, and weekly jobless claims. The Services PMI will likely have a greater impact on the GBP/USD pair, given the sector’s significant contribution to the US economy and inflation. Any uptick in service sector activity could delay the timeline for a Fed rate cut.
From a technical perspective, the GBP/USD pair is hovering above the 50-day and 200-day EMAs, signaling a bullish trend. A breakout above the $1.28013 resistance level could pave the way for a move towards the $1.30 handle. On the other hand, a drop below the 50-day EMA could bring the 200-day EMA into play. The 14-period Daily RSI is at 52.70, indicating a potential return to the $1.30 handle before reaching overbought territory.
The GBP/USD movement in the coming week will be influenced by a combination of economic data releases, central bank decisions, and technical factors. Investors will be closely monitoring developments in the UK retail sales, US housing sector, Fed policy decisions, and PMI numbers to gauge the direction of the currency pair.
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