- GBP/USD holds steady above 1.2600 to start the new week.
- The pair closed the previous six trading days in negative territory.
- The technical picture is yet to point to a buildup of recovery momentum.
GBP/USD registered six consecutive daily losses and fell over 2% in the previous week. The pair holds steady above 1.2600 in the European morning on Monday but the technical picture doesn't yet point to a buildup of recovery momentum.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.61% | 2.36% | 1.32% | 1.40% | 1.94% | 1.95% | 1.23% | |
| EUR | -1.61% | 0.71% | -0.18% | -0.10% | 0.41% | 0.43% | -0.28% | |
| GBP | -2.36% | -0.71% | -0.96% | -0.79% | -0.29% | -0.30% | -1.00% | |
| JPY | -1.32% | 0.18% | 0.96% | 0.07% | 0.51% | 0.70% | -0.10% | |
| CAD | -1.40% | 0.10% | 0.79% | -0.07% | 0.58% | 0.52% | -0.19% | |
| AUD | -1.94% | -0.41% | 0.29% | -0.51% | -0.58% | -0.01% | -0.66% | |
| NZD | -1.95% | -0.43% | 0.30% | -0.70% | -0.52% | 0.00% | -0.72% | |
| CHF | -1.23% | 0.28% | 1.00% | 0.10% | 0.19% | 0.66% | 0.72% |
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 broad-based US Dollar (USD) strength weighed heavily on GBP/USD last week. Hawkish comments from Federal Reserve (Fed) officials and the inflation data from the US, which showed that the annual core Consumer Price Index (CPI) rose 3.3% in October, helped the USD outperform its rivals.
Meanwhile, the UK's Office for National Statistics (ONS) reported on Friday that the UK's Gross Domestic Product (GDP) expanded by 0.1% on a quarterly basis in the third quarter. This reading missed the market expectation for a 0.2% growth and didn't allow GBP/USD to gain traction ahead of the weekend.
In the absence of high-tier data releases, investors could react to changes in risk perception on Monday. At the time of press, US stock index futures were trading mixed. In case Wall Street's main indexes start the week on a bearish note amid escalating geopolitical tensions, GBP/USD could have a hard time holding its ground.
Over the weekend, CNN News reported that US President Joe Biden has authorized Ukraine to use powerful long-range American weapons to strike inside Russia. Reporting on the matter, “the change comes largely in response to Russia's deployment of North Korean ground troops to supplement its own forces, a development that has caused alarm in Washington and Kyiv,” Reuters said.
In the early trading hours of the American session, Chicago Fed President Austan Goolsbee will be delivering a speech. According to the CME FedWatch Tool, markets are currently pricing in a nearly 40% probability of the Fed holding the policy rate unchanged at the December meeting. If Goolsbee adopts a cautious tone regarding another rate cut before the end of the year, GBP/USD could come under renewed bearish pressure.
GBP/USD Technical Analysis
GBP/USD was last seen trading near the upper limit of the 10-day-old descending regression channel at around 1.2630. In case the pair starts using this level as support, sellers could remain on the sidelines. However, the Relative Strength Index (RSI) indicator on the 4-hour chart remains below 40, suggesting that even if the pair rises, it would be considered as a technical correction rather than a reversal.
Above 1.2630, the 20-period Simple Moving Average (SMA) could act as next resistance at 1.2670 before 1.2700 (round level, static level). On the downside, 1.2580 (mid-point of the descending channel) could be seen as first support before 1.2530 (lower limit of the descending channel) and 1.2500 (round 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, 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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