• British companies reported unexpected growth in November.

• The dollar is heading for a monthly loss of over 3%.

• Market pricing indicates a 23% chance that the Fed may cut rates as early as March next year.

Monday’s GBP/USD forecast turned decidedly bullish, kicking off the week with optimism as the pound surged to a two-month high, building on the momentum from the previous week. This upward trajectory was fueled by a surprising surge in growth reported by British companies in November, breaking a three-month contraction streak.

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As such, Carol Kong, a currency strategist at the Commonwealth Bank of Australia, noted, “This indicates the resilience of the UK economy despite the very aggressive monetary policy tightening from the Bank of England. However, we still anticipate the UK economy weakening and going through a short-lived recession.”

Moreover, the pound was set for a roughly 3.8% gain for the month, its most substantial monthly increase in a year.

Meanwhile, the dollar index slipped by 0.12% to 103.31. It was heading for a monthly loss of over 3%, marking its worst performance in a year.

CPI inflation rates across much of the G10 remain above central bank targets. Consequently, there is a strong incentive for policymakers to support the ‘higher for longer’ theme. Additionally, higher market rates will help in the battle against inflation.

However, investors are looking beyond this policy and seem increasingly focused on speculating about the timing and pace of rate cuts next year. Market pricing indicates a 23% chance that the Fed may commence easing monetary policy as early as March next year, according to the CME FedWatch tool.

GBP/USD key events today

• US building permits report
• US new home sales report

GBP/USD technical forecast: Bulls charge ahead, RSI signals overbought levels

The pound is bullish, trading well above the 30-SMA and the RSI overbought. Moreover, the price has made higher highs and lows while respecting the 30-SMA as support. It shows a well-developed trend that might continue higher. The price is currently above the 1.2600 level and might reach 1.2651.

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However, with the RSI overbought, we might see bulls pause for a breath. Consequently, the price might consolidate or pull back to retest the 30-SMA support. Still, the bullish trend has upside potential. Therefore, bulls will likely push beyond the 1.2651 level.

https://www.forexcrunch.com/gbp-usd-forecast-pound-extends-gains-to-a-two-month-high/