Key Points
- The UK’s economic activity remained subdued, with minimal influence on the GBP/USD pair.
- The Federal Reserve’s indication of avoiding an interest rate cut in March 2024 further bolstered the US dollar’s position.
- The US economy demonstrated unexpected growth in early 2024, strengthening the US dollar significantly.
- The GBP/USD pair experienced a significant breakout from its previous range, largely driven by US economic data.
- Future movements in the GBP/USD pair hinge on key support levels, with the potential for further decline.
The onset of 2024 has seen the US economy gaining unexpected momentum, continuing its strong performance from the previous year. This surge is evidenced by key indicators such as the Non-Farm Payrolls and the ISM Services PMI report, which recorded an impressive 53.4, surpassing the anticipated 52.0. This acceleration underscores the robustness of the US economy and has significantly bolstered the US dollar’s stance in the global currency market.
USD Dominates in Early 2024, Fed Shuns Rate Cut
From the third quarter of the previous year into early 2024, the US dollar emerged as the dominant currency, a reflection of sustained economic growth. This trend, often referred to as “US Economic Exceptionalism,” is largely due to consistently positive economic reports. The Federal Reserve’s early 2024 posture further solidified the dollar’s dominance. Citing strong economic data, several Federal Reserve officials expressed reluctance to reduce interest rates in March, which further strengthened the dollar.
UK Economic Stagnation: Minimal GBP/USD Impact
While the US enjoyed a dynamic economic scene, the UK’s economy showed relative stagnation during the same timeframe. The Construction PMI report, despite being notable, did not significantly shift market sentiments. The UK’s quiet economic spell had a marginal impact on the GBP/USD pair, allowing global economic factors to play a more significant role.
GBP/USD Exits 200-Pip Range, Reaches 1.2525 Support
The GBP/USD currency pair, commonly referred to as ‘cable’, marked a significant move in early 2024. Influenced heavily by the robust US economic data and the Federal Reserve’s hawkish remarks, the pair exited its 7-week 200-pip trading range between 1.2600 and 1.2800. Consequently, it tested a vital support level at 1.2525, nearing the 200-day EMA and the 38.2% Fibonacci retracement of its Q4 rally.
GBP/USD Outlook: Aiming for 1.2400 Amid US-UK Dynamics
The future path of the GBP/USD pair seems poised for a further decline if it breaks through the 1.2525 support level. A move towards the “measured move” target near 1.2400 is likely, aligning with the 50% Fibonacci retracement of the Q4 rally at approximately 1.2430. This potential movement will depend on the continuing economic trends in the US and UK, as well as any unforeseen global economic developments.
