GBP/USD Forecast: Pound Sterling needs to stabilize above 1.2830 to extend uptrend
- GBP/USD touched its highest level in three months above 1.2850 on Wednesday.
- The pair stays below 1.2800 in the European session on Thursday.
- Pound Sterling could extend uptrend in case it flip 1.2830 into support.
GBP/USD gathered bullish momentum and reached its highest level since early March above 1.2850 on Wednesday. The pair erased a portion of its daily gains in the late American session but closed in positive territory for the third consecutive day. Early Thursday, GBP/USD struggles to preserve its bullish momentum and trades below 1.2800.
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 | 0.00% | -0.48% | 0.20% | -0.13% | -1.06% | -1.15% | -0.22% | |
| EUR | -0.01% | -0.14% | 0.44% | 0.12% | -0.79% | -0.91% | 0.03% | |
| GBP | 0.48% | 0.14% | 0.70% | 0.27% | -0.65% | -0.77% | 0.17% | |
| JPY | -0.20% | -0.44% | -0.70% | -0.33% | -1.33% | -1.46% | -0.37% | |
| CAD | 0.13% | -0.12% | -0.27% | 0.33% | -0.89% | -1.03% | -0.10% | |
| AUD | 1.06% | 0.79% | 0.65% | 1.33% | 0.89% | -0.12% | 0.82% | |
| NZD | 1.15% | 0.91% | 0.77% | 1.46% | 1.03% | 0.12% | 0.95% | |
| CHF | 0.22% | -0.03% | -0.17% | 0.37% | 0.10% | -0.82% | -0.95% |
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 US Dollar (USD) came under heavy selling pressure and fuelled GBP/USD's rally in the early American session following soft inflation prints on Wednesday.
The Bureau of Labor Statistics (BLS) reported the Consumer Price Index (CPI) rose 3.3% on a yearly basis in May, down from the 3.4% increase recorded in April. Additionally, the CPI was unchanged on a monthly basis, while the core CPI, which excludes volatile food and energy price, was up 0.2%.
Later in the day, the USD staged a correction and caused GBP/USD to pull away from multi-month highs. The Federal Reserve (Fed) announced that it left the policy rate unchanged at 5.25%-5.5% as expected. The revised Summary of Economic Projections, the so called dot-plot, showed that 4 of 19 officials saw no rate cuts in 2024, 7 projected a 25 basis points (bps) rate reduction, while 8 marked down a 50 bps cut in the policy rate. In the meantime, Fed Chairman Jerome Powell refrained from confirming a rate cut in September and reiterated the data-dependent approach.
The US economic docket will feature the Producer Price Index (PPI) data for May later in the day. In case monthly PPI and core PPI figures come in below analysts' estimates, the USD could come under renewed bearish pressure and open the door for another leg higher in GBP/USD.
GBP/USD Technical Analysis
The mid-point of the ascending regression channel aligns as key resistance at 1.2830. Once GBP/USD confirms that level as support, it could extend its uptrend toward 1.2900 (psychological level, static level) and 1.2930 (upper limit of the ascending channel).
On the downside, the 100-period and the 50-period Simple moving Averages (SMA) on the 4-hour chart form support at 1.2750-1.2760 before 1.2730 (lower limit of the ascending channel) and 1.2700 (psychological level, static level).
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.
