GBP/USD forecast: Currency Pair of the Week – July 1, 2024

This week is all about politics in two of Europe’s large economies. We have already seen a bit of a relief rally in mainland European shares, after the National Rally recorded a smaller margin of victory in French elections than expected and as mainstream parties began seeking strategies to prevent the far-right party from obtaining an absolute majority. This will keep the French politics in focus for the rest of the week until the second round of the votes on Sunday. Ahead of that, we will have the UK general election this Thursday, July 4, making the early hours of Friday a super important period for UK assets. And with key US data to come either side of the US Independence Day on July 4, currency pairs like the GBP/USD and EUR/USD may well experience heightened volatility. The GBP/USD forecast will be impacted if there is a surprise outcome such as a hung parliament given that a Labour victory is widely expected.

Video: GBP/USD forecast and technical insights on FX majors

UK General Elections and its impact on GBP/USD forecast

The polling will take place on Thursday, July 4, when the US is out celebrating Independence Day. So, don’t expect any fireworks in the markets on Thursday. Ruling Conservatives are trailing Labour badly in the polls. If Labour does win, it must maintain investors' trust while tackling unresolved economic issues facing the UK, for example the public debt-to-GDP being at a 63-year high. It is difficult to see a dramatic turn in the fortunes of the economy. Labour will need to raise taxes or increase borrowing to avoid spending cuts. It is a lose-lose situation, one that markets have evidently accepted. Given that a labour victory is expected, the pound and FTSE could react sharply if there is a surprise outcome such as a hung parliament. From around 10pm, there will be exit polls to give us as early indication of how the parties have performed, with actual results not out until the early hours of Friday.

GBP/USD forecast: NFP among key US data highlights

After Friday’s core PCE price index, which was bang in line with expectations, more key US economic data is to come over the next couple of weeks. The June non-farm jobs report is due on Friday, followed by the CPI on July 11. This week’s other important data releases include the ISM manufacturing and services PMIs, ADP private payrolls, JOLTS Job Openings, and FOMC minutes.

Of course, the key data is on Friday, when we will have had the UK election outcome as well. The headline jobs data beat expectations last month with a print of 272,000, while wages also grew more than expected. As a result, the US dollar has been supported on the dips and we have recently seen a fresh multi-decade high in USD/JPY.

This week’s data releases could significantly impact the USD direction, which in turn should impact the GBP/USD forecast. After showing surprising resilience throughout this year so far, we could begin to see more weakness in the US economy moving forward. Indeed, economists expect the US jobs report to shown only a modest 190,000 rise in non-farm payrolls compared to 272,000 the month before.

Here’s the full list of key macro events due for release this week, relevant to the pound and US dollar, and therefore the GBP/USD forecast.

GBP/USD technical analysis

Source: TradingView.com

The GBP/USD’s technical forecast is as clear as mud. This is hardly surprising given that many traders are unwilling to commit to a particular direction ahead of the abovementioned macro events coming up in the next couple of weeks. Recently, the cable came out of its bullish channel, which thereby signalled at least a temporary end of its bullish trend that had been in place since the last week of April. Short-term resistance now comes in between 1.2685 to 1.2730 area (shaded in grey on the chart) which needs to be reclaimed if we are to see another attempt at breaking above that study 1.2800 longer-term resistance area. Support comes in around 1.2635, followed by 1.2550.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.