GBP/USD Forecast: Pound Sterling could face stiff resistance before targeting 1.3000
- GBP/USD trades comfortably above 1.2900 in the European session on Tuesday.
- The pair could encounter a strong resistance at 1.2975.
- A recovery in risk sentiment could help GBP/USD push higher.
After posting small losses on Monday, GBP/USD regains its traction on Tuesday and trades comfortably above 1.2900. The near-term technical suggests that the bullish bias remains intact but the pair could have a difficult time clearing the strong resistance at 1.2975.
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 strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -3.86% | -1.77% | -1.43% | -0.58% | -1.07% | -1.56% | -1.76% | |
| EUR | 3.86% | 2.17% | 2.57% | 3.41% | 2.90% | 2.39% | 2.18% | |
| GBP | 1.77% | -2.17% | 0.36% | 1.22% | 0.71% | 0.22% | 0.02% | |
| JPY | 1.43% | -2.57% | -0.36% | 0.86% | 0.36% | -0.14% | -0.33% | |
| CAD | 0.58% | -3.41% | -1.22% | -0.86% | -0.50% | -0.98% | -1.19% | |
| AUD | 1.07% | -2.90% | -0.71% | -0.36% | 0.50% | -0.48% | -0.68% | |
| NZD | 1.56% | -2.39% | -0.22% | 0.14% | 0.98% | 0.48% | -0.19% | |
| CHF | 1.76% | -2.18% | -0.02% | 0.33% | 1.19% | 0.68% | 0.19% |
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).
GBP/USD failed to build on the previous week's impressive gains on Monday as safe-haven flows dominated the action in financial markets. After opening in negative territory, Wall Street's main indexes declined sharply, pressured by escalating fears over an economic downturn in the US. On Sunday, US President Donald Trump acknowledged that there will be a "period of transition" when asked whether his policy changes could potentially cause a recession.
The US economic calendar will feature NFIB Business Optimism Index for February and JOLTS Job Openings data for January on Tuesday. Meanwhile, investors will remain focused on the action in stock markets.
The UK's FTSE 100 Index trades virtually unchanged in the European morning. In the meantime, US stock index futures were last seen rising between 0.4% and 0.6%. In case there is a noticeable improvement in risk mood in the second half of the day, GBP/USD could continue to stretch higher.
On Wednesday, the US Bureau of Labor Statistics will publish Consumer Price Index (CPI) data for February.
GBP/USD Technical Analysis
GBP/USD remains in the upper half of the ascending regression channel and the Relative Strength Index holds above 60 after declining toward 50 on Monday, reflecting the bullish stance. On the upside, 1.2975 (upper limit of the ascending channel) aligns as a strong resistance level ahead of 1.3000 (round level, static level) and 1.3040 (static level).
Looking south, first support could be spotted at 1.2900 (static level, round level) before 1.2830 (mid-point of the ascending channel) and 1.2800 (200-day Simple Moving Average).
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.
