On Friday, UK retail sales will also draw investor interest. A continued rise in spending could fuel demand-driven inflation and support sentiment toward a BoE hold in 2024. Economists forecast retail sales to decrease by 0.3% in February after surging 3.4% in January.

Beyond the numbers, investors must also monitor Bank of England commentary.

US Economic Calendar:  The Fed and the Services Sector

On Tuesday, the US housing sector will be in the spotlight. Housing sector data are leading indicators of the US economy. A deteriorating housing sector environment could impact consumer confidence and spending. Downward trends in consumer spending could raise the threat of a hard landing. Private consumption contributes over 60% to the US economy.

Economists forecast housing starts to surge 7% in February after sliding 14.8% in January. However, economists expect building permits to fall by 0.2% after a 0.3% decline in January.

On Wednesday, the Fed interest rate decision, FOMC Economic Projections, and Fed Press Conference warrant investor attention.

Recent inflation numbers have reduced bets on an H1 2024 Fed rate cut. The Economic Projections and Fed Press Conference could dictate near-term trends for the US dollar. Economists expect the Fed to leave interest rates at 5.5%.

Philly Fed Manufacturing, private sector PMIs, and weekly jobless claims will garner investor interest on Thursday. Barring a spike in jobless claims, the Services PMI will likely impact the GBP/USD more. The Services sector accounts for over 70% of the US economy and remains the main contributor to inflation.

A pickup in service sector activity could delay the timeline for a Fed rate cut. Beyond the headline PMI, investors must consider the sub-components, including prices, employment, and new orders.

Short-Term Forecast:

The near-term trend for the GBP/USD will hinge on the Fed and BoE policy decisions and forward guidance. However, the Services PMIs and UK retail sales figures will also dictate trends. A resilient UK economy and cracks in the US economy could bring the $1.29 handle into play.

GBP/USD Price Action

Daily Chart

The GBP/USD hovered above the 50-day and 200-day EMAs, sending bullish price signals.

A GBP/USD break above the $1.28013 resistance level would support a move to the $1.30 handle.

The Fed and the BoE warrant consideration alongside economic data from the UK and the US.

Conversely, a break below the 50-day EMA would bring the 200-day into play.

The 14-period Daily RSI at 52.70 indicates a GBP/USD return to the $1.30 handle before entering overbought territory.