GBP/USD Forecast: Pound Sterling could target 1.2840 next
- GBP/USD reached its highest level in over two months on Tuesday.
- Buyers could look to retain control while 1.2760 holds as support.
- The pair could face strong resistance at 1.2840.
GBP/USD managed to build on previous Friday's gains and closed in positive territory on Monday. The pair continued to stretch higher and reached its strongest level since March 21 above 1.2780 early Tuesday. The technical outlook suggests that GBP/USD could extend its uptrend as long as 1.2760 holds as support.
The US Dollar (USD) came under modest bearish pressure during the American trading hours on Monday and allowed GBP/USD to gain traction. Early Tuesday, the positive shift seen in risk mood makes it difficult for the USD to stay resilient against its peers and helps the pair keep its footing. Reflecting the upbeat market mood, US stock index futures were last seen rising between 0.1% and 0.5%.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.30% | -0.29% | -0.11% | -0.29% | -0.45% | -0.69% | -0.42% | |
| EUR | 0.30% | -0.02% | 0.22% | 0.00% | -0.20% | -0.49% | -0.09% | |
| GBP | 0.29% | 0.02% | 0.18% | 0.00% | -0.17% | -0.40% | -0.10% | |
| JPY | 0.11% | -0.22% | -0.18% | -0.22% | -0.36% | -0.50% | -0.34% | |
| CAD | 0.29% | -0.01% | -0.00% | 0.22% | -0.18% | -0.40% | -0.19% | |
| AUD | 0.45% | 0.20% | 0.17% | 0.36% | 0.18% | -0.19% | 0.09% | |
| NZD | 0.69% | 0.49% | 0.40% | 0.50% | 0.40% | 0.19% | 0.26% | |
| CHF | 0.42% | 0.09% | 0.10% | 0.34% | 0.19% | -0.09% | -0.26% |
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 economic calendar will offer the Conference Board's Consumer Confidence Index data for May later in the day. A noticeable improvement in consumer sentiment could support the USD and limit GBP/USD's upside in the second half of the day.
Investors will also keep a close eye on comments from Federal Reserve (Fed) officials. Minneapolis Fed President Neel Kashkari told CNBC earlier in the day that the Fed could consider raising the policy rate if inflation were to fail to come down further. "Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back," Kashkari added.
GBP/USD Technical Analysis
GBP/USD holds above 1.2760, where the Fibonacci 78.6% retracement of the latest downtrend is located. If the pair continues to use that level as support, it could face interim resistance at 1.2800 (psychological level, static level) before targeting 1.2840 (upper limit of the ascending regression channel).
On the downside, supports could be seen at 1.2760-1.2750 (Fibonacci 78.6% retracement, mid-point of the ascending channel), 1.2700 (psychological level, static level) and 1.2670 (lower limit of the ascending channel).
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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
