- Sterling is holding on to gains on upbeat sentiment and a weakening US dollar.
- US jobless claims were in line with estimates, showing the labor market remains tight.
- Traders expect a 25 basis point rate hike from the Federal Reserve in February 2023.
- GBP/USD Price Analysis: Failing to break above 1.2100 will worsen the fall below 1.2000.
The pound sterling (GBP) remains sideways during the American session after reaching a daily low of 1.2005 against the US dollar (USD). Risk aversion spurred on by factors related to China learning to live with the coronavirus is keeping investors on edge. Meanwhile, the latest jobless claims report shows that the US job market remains tight. At the time of writing these lines, GBP/USD is trading at 1.2033.
Initial Claims for Unemployment Benefits failed to prop up the dollar
Wall Street is preparing for a higher open, imitating the European stock indices. The US Bureau of Labor Statistics (BLS) revealed that initial claims for unemployment benefits for the week ending December 24 rose by 225,000, in line with expectations. The same report showed that continuing claims rose to 1.7 million in the week ending Dec. 17, the highest number since early February.
Will the Federal Reserve go up 50 or 25 basis points in February 2023?
Although the US Federal Reserve (Fed) has raised rates to 4.50% during 2022 to tame inflation. US Fed Chairman Jerome Powell and company have stressed that the labor market is tight and that the unemployment rate should be higher due to the imbalance between labor supply and demand. As the end of the year approaches, CME’s FedWatch tool shows investors expect a 25 basis point rate hike at the February 1 meeting, while Eurodollar futures show traders expect a 25 basis point hike. 50 basis points.
Falling US Bond Yields Boost GBP/USD
Elsewhere, GBP/USD is boosted by US dollar dynamism due to lack of UK economic data. The US Dollar Index (DXY), an indicator that tracks the value of the dollar against a basket of six currencies, fell 0.36% to 104,093, weighed down by falling US Treasury yields. The US 10-year Treasury yield falls three basis points, yielding 3.856%.
To consider
On Friday, the UK economic calendar is empty, while in the US the Chicago PMI for December will be released, estimated at 40.
GBP/USD Price Analysis: Technical Perspective
From a daily chart standpoint, the rise in GBP/USD was capped by the 200 and 20 day EMAs each at 1.2111 and 1.2082. Oscillators such as the Relative Strength Index (RSI) and the Rate of Exchange (RoC) suggest that sellers are starting to pick up momentum, despite GBP/USD rising. That being said, the first support for GBP/USD would be last week’s low at 1.1997. A break below would expose the 50 day EMA at 1.1936, followed by the 100 day EMA at 1.1884.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
