GBP/USD Forecast: Bullish bias remains intact ahead of US data
- GBP/USD continues to push higher following Monday's upsurge.
- The pair faces the next resistance level at 1.2575.
- Investors await key macroeconomic data releases from the US.
GBP/USD capitalized on the broad-based US Dollar (USD) weakness and registered impressive gains on Monday. The pair continues to stretch higher in the European session on Tuesday and trades near the key resistance area at 1.2575.
British Pound PRICE This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.14% | -1.14% | 0.25% | -0.98% | -1.03% | -1.24% | -0.69% | |
| EUR | 1.14% | -0.01% | 1.38% | 0.22% | 0.15% | -0.07% | 0.49% | |
| GBP | 1.14% | 0.00% | 1.39% | 0.22% | 0.16% | -0.09% | 0.49% | |
| JPY | -0.25% | -1.38% | -1.39% | -1.23% | -1.26% | -1.46% | -0.71% | |
| CAD | 0.98% | -0.22% | -0.22% | 1.23% | -0.12% | -0.31% | 0.26% | |
| AUD | 1.03% | -0.15% | -0.16% | 1.26% | 0.12% | -0.22% | 0.34% | |
| NZD | 1.24% | 0.07% | 0.09% | 1.46% | 0.31% | 0.22% | 0.56% | |
| CHF | 0.69% | -0.49% | -0.49% | 0.71% | -0.26% | -0.34% | -0.56% |
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 improving market mood made it difficult for the USD to find demand at the beginning of the week. Risk flows dominated the action in financial markets and triggered a USD selloff after the Washington Post reported that US President-elect Donald Trump's aides were exploring tariff plans that would be applied to every country but only cover critical imports.
Later in the day, Trump disputed this claim in a social media post and helped the USD find a foothold, calling the story "just another example of fake news."
The ISM Services PMI report for December and JOLTS Job Openings data for November from the US will be watched closely by market participants in the second half of the day.
The headline ISM Services PMI is expected to rise to 53 from 52.1 in November. A reading below 50, which would point to a contraction in the service sector's economic activity, could put additional weight on the USD's shoulders and open the door for another leg higher in GBP/USD. Conversely, a strong print of 55 or higher could support the USD.
GBP/USD Technical Analysis
As of writing, GBP/USD was trading near 1.2575, where the Fibonacci 50% retracement level of the latest downtrend is located. Once the pair stabilizes above this level and starts using it as support, it could target 1.2620-1.2630 (200-period Simple Moving Average (SMA), Fibonacci 61.8% retracement) and 1.2700 (Fibonacci 78.6% retracement) next.
On the downside, first support could be seen at 1.2555 (100-period SMA) before 1.2525 (Fibonacci 38.2% retracement), 1.2500 (round level, 50-period SMA) and 1.2460 (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, also known as ‘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.
