GBP/USD edges higher amid US economic slowdown, expectations for Fed cuts

• GBP/USD rises more than 0.20% due to a deteriorating economic outlook in the US.
• US jobless claims exceeding forecasts portray the labor market is easing.
• Federal Reserve officials pushed back against rate cuts next year, with investors pricing 88 bps of Fed cuts.

The Pound Sterling (GBP) clings to its earlier gains versus the US Dollar (USD) on Thursday as the economy in the United States (US) deteriorates further, warranting no additional tightening by the Federal Reserve. In price action terms, the GBP/USD jumped from daily lows of 1.2370 and trades at 1.2447, up 0.26%.

Pound Sterling gains as US data weakens US Dollar, GBP/USD traders eye UK Retail Sales

Investors’ sentiment deteriorated after US economic data portrayed that the economy is losing steam faster than expected. US Initial Jobless Claims for the last week rose by 231K more than the 220K expected, revealed the US Department of Labor. Further data revealed by the US Federal Reserve noted that Industrial Production in October contracted, hurt by the auto strike.

In the meantime, Federal Reserve speakers crossed newswires, they’re trying to push back against rate cut expectations, led by Cleveland Fed President Loretta Mester, who said the US central bank is data dependent on whether to raise rates further. Meanwhile, interest rates traders have priced in 88 basis points of rate cuts for 2024.

The GBP/USD rise is also courtesy of the broad weakness of the Greenback. The US Dollar Index (DXY) dropped 0.01%, at 104.38, undermined by the fall in US Treasury bond yields.

Aside from this, the latest UK inflation report revealed that consumer inflation dropped to 4.6%, down from 6.7%, the lowest since October 2021. Even though the Bank of England (BoE) has stressed rates need to be higher for longer, money market futures are not expecting more rate hikes.

Ahead in the calendar, UK Retail Sales are expected to print a recovery after plunging -0.9% in September monthly data. Annually, estimates are at -1.5% contraction, worse than the September data. In the US, housing data, Building Permits, and Fed speakers, are expected to offer fresh impetus to GBP/USD traders.

GBP/USD Price Analysis: Technical outlook

The daily chart portrays the pair as neutral to upward biased, though the GBP/USD failed to remain above the 200-day moving average (DMA) at 1.2440, which could exacerbate a dip below the 1.2400 figure. A breach of the latter would expose the 1.2300 mark, head of testing the 50-DMA at 1.2256, with next support seen at a November 13 low of 1.2209. On the upside, if buyers reclaim the 200-DMA, a test of 1.2500 is on the cards.