GBP/USD Likely to Resume Downtrend Amid Forecast of Lower Unemployment Rate in the US

Last Updated on January 4, 2022

United Kingdom – Net Lending to Individuals

On Tuesday, at GMT 9:30 a.m., the Bank of England released the month-over-month net lending to individuals figure. It measures the changes in the total value of new credit issued to consumers in the past month.

Consumer spending is highly correlated with consumer credit.  The net lending to individuals figure can indicate future consumer spending as well as consumer confidence in the economy. This is because people only take on debt when they feel financially secure about future incomes. Hence, CFD traders consider it to be a leading indicator of the UK’s economic conditions.

Last month, the last net lending to individuals figure came out at 2.0 billion. The forecast for this month was set at 3.9 billion. The actual figure came out much better, at 4.9 billion.

United States – Unemployment Rate

On Friday, at GMT 1:30 p.m., the US Bureau of Labor Statistics will release the national unemployment rate. It measures the percentage of the total workforce which remained unemployed over the past month.

Forex traders consider the unemployment rate to be one of the most important fundamental indicators of the US economy. It is because one of the main goals of the Federal Reserve is to keep unemployment as low as possible. Although this is a lagging indicator, analyzing this data can help Forex traders predict future interest rates and inflation situations in the country.

Last month, the unemployment rate in the United States came out at 4.2%. This month, analysts are expecting it to come down to 4.1%.

GBP/USD Forecast

Since June 1, 2021, the GBP/USD remained in a strong downtrend. Over the last two quarters, it fell by around 1085 pips or 7.63%. However, after reaching near the 1.3200 level, the GBP/USD found strong support. Over the last week, it started a bullish retracement. Currently, it is testing the pivot zone around the 1.3500 level and trading just below the downtrend line.

The UK’s Net Lending to Individuals improved over the last month and came out at 4.9 billion. However, the effect of the lending growth will likely take some time to materialize into economic growth. By contrast, analysts are expecting the US unemployment rate to come down from 4.2% to 4.1% with immediate effect. We believe it would set a bearish fundamental outlook for the GBP/USD this week. Therefore, if the GBP/USD closes below the support near 1.3410, it would likely attract additional bearish momentum in the market.

Hence, CFD traders should look out for trading opportunities below this major support level around 1.3410.

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