GBP/USD Forecast: Pound Sterling remains fragile as key resistance remains intact
- GBP/USD edges lower after failing to stabilize above 1.2600.
- The US Dollar started the new week under selling pressure.
- The pair's near-term technical outlook suggests that the bearish bias remains unchanged.
GBP/USD gathered bullish momentum at the weekly opening and climbed above 1.2600. After failing to stabilize above this level, however, the pair lost its traction and retreated to the 1.2550 area in the European morning.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.36% | -0.18% | 0.37% | 0.11% | 0.04% | 0.29% | -0.06% | |
| EUR | 0.36% | -0.00% | 0.13% | -0.13% | 0.31% | 0.07% | -0.29% | |
| GBP | 0.18% | 0.00% | 0.14% | -0.13% | 0.31% | 0.08% | -0.29% | |
| JPY | -0.37% | -0.13% | -0.14% | -0.26% | 0.09% | -0.01% | -0.25% | |
| CAD | -0.11% | 0.13% | 0.13% | 0.26% | 0.08% | 0.21% | -0.19% | |
| AUD | -0.04% | -0.31% | -0.31% | -0.09% | -0.08% | -0.23% | -0.60% | |
| NZD | -0.29% | -0.07% | -0.08% | 0.00% | -0.21% | 0.23% | -0.36% | |
| CHF | 0.06% | 0.29% | 0.29% | 0.25% | 0.19% | 0.60% | 0.36% |
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).
News of Donald Trump selecting fund manager Scott Bessent as his nominee for the US Treasury Secretary caused US Treasury bond yields to decline sharply at the beginning of the week.
Assessing the market reaction to this development, "the market view that Bessent is a “safe hands” candidate, may see some relief rally in Treasuries from the open on Monday, as the risk of a more unorthodox candidate is priced out," noted Societe Generale analyst Stephen Spratt. "We suspect his view that tariffs should be "layered" and that initial levels being discussed are “maximalist” positions."
The US economic calendar will not feature any high-tier data releases that could drive the US Dollar's (USD) valuation on Monday, allowing the risk perception to influence markets. In the European morning, US stock index futures gain between 0.45% and 0.6%. A bullish opening in Wall Street, followed by a risk rally, could trigger another leg lower in the USD and help GBP/USD stretch higher.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40 after rising toward 50 in the early Asian session on Monday, suggesting that buyers remain hesitant to bet on further Pound Sterling strength. On the downside, the mid-point of the descending regression channel aligns as immediate support at 1.2530 before 1.2500 (round level, static level) and 1.2420 (lower limit of the descending channel).
Looking north, first resistance could be seen at 1.2600 (round level, static level) ahead of 1.2635-1.2640 (50-period Simple Moving Average (SMA), upper limit of the ascending channel) and 1.2700 (round 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, 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.
