GBP/USD Forecast: Pound Sterling stays bullish to start the week
- GBP/USD trades at around 1.2750 in the European session.
- UK and US markets will remain closed on Monday.
- The near-term technical outlook suggests that the bullish bias remains intact.
GBP/USD stays in a consolidation phase near 1.2750 in the European session on Monday after closing the previous week marginally higher. The pair's near-term technical picture suggests that the bullish bias remains intact but 1.2760 could be a tough resistance to crack.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | -0.35% | 0.82% | 0.31% | 0.78% | -0.02% | 0.60% | |
| EUR | -0.15% | -0.54% | 0.70% | 0.17% | 0.67% | -0.17% | 0.46% | |
| GBP | 0.35% | 0.54% | 1.10% | 0.70% | 1.20% | 0.36% | 0.97% | |
| JPY | -0.82% | -0.70% | -1.10% | -0.52% | -0.03% | -0.81% | -0.22% | |
| CAD | -0.31% | -0.17% | -0.70% | 0.52% | 0.43% | -0.32% | 0.28% | |
| AUD | -0.78% | -0.67% | -1.20% | 0.03% | -0.43% | -0.84% | -0.23% | |
| NZD | 0.02% | 0.17% | -0.36% | 0.81% | 0.32% | 0.84% | 0.61% | |
| CHF | -0.60% | -0.46% | -0.97% | 0.22% | -0.28% | 0.23% | -0.61% |
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) benefited from upbeat macroeconomic data releases in the previous week but GBP/USD managed to hold its ground as the strong inflation data from the UK revived expectations about a delay in the Bank of England's (BoE) policy pivot.
On Friday, the positive shift seen in risk sentiment caused the USD to lose interest and allowed the pair to stretch higher heading into the weekend.
Financial markets in the UK and the US will remain closed on Monday. Hence, GBP/USD could have a difficult time gathering directional momentum in the second half of the day. The UK economic docket will not feature any high-tier data releases this week. The US Bureau of Economic Analysis will publish the second estimate of the first-quarter Gross Domestic Product growth on Thursday and release the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's (Fed) preferred gauge of inflation, on Friday.
GBP/USD Technical Analysis
GBP/USD stays in the upper half of the ascending regression channel coming from late April and the Relative Strength Index (RSI) indicator on the 4-hour chart holds near 60, reflecting the bullish bias.
On the upside, key resistance is located at 1.2760 (Fibonacci 78.6% retracement of the latest downtrend) before 1.2800-1.2810 (static level, upper limit of the ascending channel) and 1.2850 (static level). Supports could be seen at 1.2730 (mid-point of the ascending channel, 20-period Simple Moving Average), 1.2670 (Fibonacci 61.8% retracement) and 1.2640 (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.
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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.
