GBP/USD Forecast: Bearish pressure builds up as focus shifts to Fed and BoE meetings
- GBP/USD stays under modest bearish pressure in the European morning on Monday.
- The Fed and the BoE will announce monetary policy decisions later in the week.
- The technical outlook suggests that the bearish bias remains unchanged.
After posting losses for the second consecutive week, GBP/USD stays under pressure early Monday and trades in negative territory below 1.2850. The pair's near-term technical outlook points to a buildup of bearish momentum.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.68% | -2.37% | 0.88% | 2.19% | 2.34% | -0.35% | |
| EUR | -0.37% | 0.29% | -2.77% | 0.47% | 1.86% | 1.91% | -0.75% | |
| GBP | -0.68% | -0.29% | -3.15% | 0.16% | 1.56% | 1.60% | -1.08% | |
| JPY | 2.37% | 2.77% | 3.15% | 3.36% | 4.74% | 4.79% | 2.01% | |
| CAD | -0.88% | -0.47% | -0.16% | -3.36% | 1.39% | 1.45% | -1.23% | |
| AUD | -2.19% | -1.86% | -1.56% | -4.74% | -1.39% | 0.06% | -2.60% | |
| NZD | -2.34% | -1.91% | -1.60% | -4.79% | -1.45% | -0.06% | -2.61% | |
| CHF | 0.35% | 0.75% | 1.08% | -2.01% | 1.23% | 2.60% | 2.61% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The Federal Reserve (Fed) and the Bank of England (BoE) will announce monetary policy decisions later in the week.
Growing expectations for a BoE rate cut this Thursday make it difficult for Pound Sterling to find demand. According to Reuters, UK interest rate futures point to a 58% chance of a 25 basis points (bps) BoE rate cut on August 1, up from nearly 50% on Friday.
The Fed is widely expected to leave policy settings unchanged following the July 30-31 policy meeting. As markets have already fully priced in a 25 bps Fed rate reduction in September, Pound Sterling's valuation heading into the BoE meeting could continue to drive GBP/USD's action.
The economic calendar will not feature any high-impact data releases and GBP/USD could struggle to stage a rebound in the near term.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart turned south and fell below 40, after rising toward 50 ahead of the weekend, reflecting buyers' hesitancy. Additionally, GBP/USD lost its traction after testing the key resistance level at 1.2880, where the descending trend line, Fibonacci 38.2% retracement level of the latest uptrend and the 100-period Simple Moving Average (SMA) meet.
On the downside, immediate support aligns at 1.2830 (Fibonacci 50% retracement). Once this support fails, additional losses toward 1.2800-1.2790 (psychological level, 200-period SMA) could be seen before 1.2750 (static level).
1.2880 (Fibonacci 38.2% retracement, descending trend line) aligns as first resistance before 1.2900 (psychological level, static level, 100-period SMA) and 1.2940 (Fibonacci 23.6% retracement).
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
