GBP/USD downtrend stalls as bulls target 1.2600

• GBP/USD rebounds from weekly lows, boosted by positive sentiment that diminishes the dollar’s safe-haven appeal.
• The easing of the US labor market supports the Fed’s rate cut speculation, changing the market narrative.
• ECB, Fed and BoE rate cut expectations in swap markets: ECB at 140 bp, Fed at 120 bp, BoE at 75 bp; UK economic data mixed.

The GBP/USD pair limited its three-day decline, rallied from weekly lows reached around 1.2544, and traded hands near the 1.2600 figure, posting modest gains of 0.23% at the end of the North American session.

Upbeat market sentiment and Fed rate cut speculation a tailwind for GBP/USD

Sentiment is one of the main drivers of the session, which remains positive to the detriment of the safe haven status of the Dollar (USD). The GBP/USD continues to be supported by the fall of the Dollar, which, according to the Dollar Index (DXY), loses 0.67% and is trading at 103.48.

Meanwhile, the labor market continues to ease pressure from the US Federal Reserve. Data for the current week saw jobless claims rise by 220,000, surpassing the previous reading of 218,000, despite failing to meet estimates for a higher print. US job cuts exceeded the October figure by 24% and amounted to 45,510 compared to the 38,836 reported last month.

Given the Fed’s fundamental background and future guidance, the narrative in financial markets shifted from high inflation to rate cuts, which would be the first central bank to ease policy. Speculation suggests that the European Central Bank (ECB) could be the first to pull the trigger in March, followed by the Federal Reserve in May and the Bank of England (BoE) in July.

Estimated rate for each central bank according to the swap markets, for the ECB at 140 basis points, the Fed at 120 basis points, and the BoE at 75 basis points.

Aside from this, the week’s UK economic data showed that business activity in the services sector improved. However, the S&P Global/CIPS construction PMI fell sharply, compared to 45.6 in October, to 45.5. This contrasts with the composite PMI, which suggests the economy is expanding more slowly.

Meanwhile, GBP/USD traders are keeping an eye on Friday’s US nonfarm payrolls report, looking for a green light to continue extending their gains if the data reports support for the slowdown thesis. of the American economy. If not, new falls are expected, since the Markets had anticipated the beginning of the Fed’s relaxation cycle.

GBP/USD Price Analysis: Technical Insights

Major currencies maintain their bullish bias unless they break the last support level at 1.2506, the November 14 high. Despite trading higher, the 100-day moving average (DMA) crossing below the 200-DMA is opening the door for a bearish resumption. However, as long as GBP/USD remains above the aforementioned support zone, the bulls can maintain hope for higher prices. Key resistance levels sit at 1.2600, followed by the December 5 high at 1.2651, before the psychological level of 1.2700. On the opposite side, the first support lies at 1.2500, followed by the 200-DMA at 1.2481 and the 100-DMA at 1.2465.