Pound-to-Dollar Week Ahead Forecast: Pulling Back

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Pound Sterling could fall back against the Dollar in the coming days.

The Pound-to-Dollar exchange rate (GBP/USD) has entered an uptrend, but there is increasing scope for the trend to pause.

The pair rallied to a new high of 1.2987 last week and triggered overbought readings on the Relative Strength Index (RSI), which advocated for a consolidation.

The presence of strong resistance at 1.30 could also be contributing to a general sense of exhaustion in the uptrend.

Image © Adobe Images

The chart above shows that GBP/USD has broken above the 200-day moving average (blue line), which says, as a rule, the exchange rate has now entered an uptrend.

That uptrend is defined by the rising red trend line, which is evident in the chart.

What the picture is saying is that the pair can retreat over the coming week without invalidating the uptrend.

A pullback into the mid-1.28s is therefore our preferred setup, particularly given the risks in the coming week.

We have central bank meetings in the U.S. and the UK, and we think guidance will offer the chance to pare recent gains.

Bank of America Predicts 1.44 for GBP/USD! If they're right, what does it mean for you? Read more.

GBP Week Ahead

It's a busy two weeks ahead for the UK economy, but interest only picks up from Thursday onwards when we get the Bank of England decision and earnings data release.

Thursday, March 20

📌 Average Weekly Earnings (Jan, 3m/12m YoY)
Inc. Bonuses: Expected: 5.8% | Previous: 6.0%
Ex. Bonuses: Expected: 5.9% | Previous: 5.9%

🔹 Market Impact:
A stronger-than-expected reading could indicate wage-driven inflation, reducing rate cut expectations and supporting GBP.
A weaker reading may signal wage growth cooling, increasing BoE rate cut speculation, weakening GBP.

📌 ILO Unemployment Rate (Jan)
Expected: 4.5%
Previous: 4.4%

🔹 Market Impact:
If unemployment rises above expectations, it could indicate labor market weakness, increasing pressure for BoE rate cuts, potentially weighing on GBP.
A stable or lower unemployment rate may support GBP by reinforcing economic resilience.

📌 Employment Change (3m/3m, Jan)
Expected: 95K
Previous: 107K

🔹 Market Impact:
If employment figures exceed expectations, it suggests labour market strength, supporting GBP.
A weaker-than-expected print may indicate hiring slowdown, weakening GBP.

📌 Bank of England (BoE) Interest Rate Decision
Expected: 4.50% (unchanged)
Previous: 4.50%

🔹 Market Impact:
If the BoE signals a cautious stance on rate cuts, it could support GBP.
If the BoE hints at earlier rate cuts, it may weaken GBP.

Friday, March 21

📌 GfK Consumer Confidence (Mar)
Expected: -21
Previous: -20

🔹 Market Impact:
A higher reading (less negative) suggests improving consumer sentiment, potentially supporting GBP.
A lower reading could indicate consumer pessimism, weighing on GBP.

📌 Public Sector Net Borrowing (Feb)

Expected: £7.0bn
Previous: -£15.4bn

🔹 Market Impact:
A higher-than-expected deficit may raise fiscal concerns, weakening GBP.
A better-than-expected print could support GBP by easing fiscal concerns.

A Busy U.S. Calendar

It's a busy week in the U.S., with investors keen to scrutinise the latest data for confirmation of an emerging slowdown.

With this in mind, the Federal Reserve's decision and guidance on the matter will prove to be the week's highlight for global FX.

Monday, March 17

📌 Retail Sales Advance (Feb, MoM)
Expected: 0.7%
Previous: -0.9%

🔹 Market Impact:
A strong rebound in retail sales signals robust consumer spending, supporting USD strength.
A weaker-than-expected print could raise concerns about slowing demand, potentially weighing on USD.

📌 Empire Manufacturing Index (Mar)
Expected: -2.0
Previous: 5.7

🔹 Market Impact:
A negative reading suggests deterioration in factory activity, potentially weighing on USD.
If the index exceeds expectations, it could signal manufacturing sector stabilisation, supporting USD.

Tuesday, March 18

📌 Industrial Production (Feb, MoM)
Expected: 0.2%
Previous: 0.5%

🔹 Market Impact:
A strong reading supports economic momentum, reinforcing USD strength.
A negative surprise could raise recession concerns, weakening USD.

Wednesday, March 19

📌 FOMC Interest Rate Decision
Expected Range: 4.25% – 4.50% (unchanged)
Previous: 4.25% – 4.50%

🔹 Market Impact:
If the Fed maintains a hawkish stance, USD could strengthen as rate cut expectations are pushed further out.
If the Fed signals easing, USD could weaken on expectations of lower future yields.

📌 Fed Chair Powell’s Press Conference

🔹 Market Impact:
Hawkish commentary (inflation risks remain, no rush to cut rates) would boost USD.
Dovish tone (highlighting economic risks, openness to cuts) could weaken USD.

Thursday, March 20

📌 Initial Jobless Claims (Week of March 15)
Expected: 225K
Previous: 220K

🔹 Market Impact:
A higher-than-expected number suggests labor market weakness, increasing rate cut expectations, which could weigh on USD.
A lower-than-expected print reinforces tight labor conditions, supporting USD.

📌 Philadelphia Fed Business Outlook (Mar)
Expected: 10.0
Previous: 18.1

🔹 Market Impact:
A sharp drop in business confidence could indicate slowing growth, potentially pressuring USD.
A higher-than-expected reading would signal resilient business conditions, supporting USD.