- GBP/USD climbed to its highest level since March 2022 above 1.3300 on Friday.
- Upbeat Retail Sales data from the UK boosts Pound Sterling.
- The pair's near-term technical outlook points to overbought conditions.
Following Thursday's volatile action, GBP/USD gathers bullish momentum and trades at its highest level since March 2022 above 1.3300 in the European morning on Friday. The pair's near-term technical outlook points to overbought conditions.
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 | -0.90% | -1.50% | 1.56% | -0.28% | -1.66% | -1.42% | -0.13% | |
| EUR | 0.90% | -0.66% | 2.43% | 0.60% | -0.81% | -0.60% | 0.74% | |
| GBP | 1.50% | 0.66% | 3.03% | 1.26% | -0.16% | 0.09% | 1.41% | |
| JPY | -1.56% | -2.43% | -3.03% | -1.80% | -3.10% | -2.91% | -1.73% | |
| CAD | 0.28% | -0.60% | -1.26% | 1.80% | -1.47% | -1.15% | 0.03% | |
| AUD | 1.66% | 0.81% | 0.16% | 3.10% | 1.47% | 0.24% | 1.56% | |
| NZD | 1.42% | 0.60% | -0.09% | 2.91% | 1.15% | -0.24% | 1.32% | |
| CHF | 0.13% | -0.74% | -1.41% | 1.73% | -0.03% | -1.56% | -1.32% |
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 Bank of England (BoE) announced on Thursday that it left the policy rate unchanged after the September meeting, as expected. In a hawkish surprise, only one policymaker voted in favor of a 25 basis points rate cut. Speaking later in the day, BoE Governor Andrew Bailey said that he is optimistic that interest rates in the UK will fall but added that they need to see more evidence of residual inflation pressure disappearing. Although GBP/USD retreated slightly after the BoE event, it closed in positive territory on Friday.
The renewed selling pressure surrounding the US Dollar (USD) and the upbeat data from the UK helped GBP/USD push higher early Friday. The UK's Office for National Statistics reported that Retail Sales rose 1% on a monthly basis in August, surpassing the market expectation for an increase of 0.4%.
The economic calendar will not offer any high-tier data releases that could impact GBP/USD's action on Friday. Hence, investors could pay close attention to changes in risk perception. On Thursday, Wall Street's main indexes registered strong gains. In the European morning on Friday, US stock index futures trade marginally lower. A deep correction in US stocks after the opening bell could support the USD and limit GBP/USD upside. On the other hand, investors could ignore overbought conditions and allow the pair to stretch higher if risk flows continue to dominate the financial markets heading into the weekend.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 80, reflecting overbought conditions for GBP/USD. On the upside, 1.3350 (upper limit of the ascending regression channel) aligns as next resistance before 1.3400 (psychological level, static level).
In case GBP/USD retreats below 1.3300 (mid-point of the ascending channel) and starts using this level as resistance, an extended correction toward 1.3230 (lower limit of the ascending channel) could be seen.
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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