- GBP/USD trades marginally higher on the day at around 1.3100.
- UK employment data helps Pound Sterling hold its ground early Tuesday.
- The market mood could drive the pair's action in the absence of high-impact data releases.
GBP/USD closed the first trading day of the week in negative territory and continued to edge lower in the Asian session on Tuesday. After touching its lowest level in nearly three weeks at 1.3058, the pair staged a modest rebound. Nevertheless, the near-term technical outlook suggests that the bearish bias remains intact.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.46% | 0.38% | 0.90% | 0.08% | 0.22% | 0.44% | 0.45% | |
| EUR | -0.46% | -0.14% | 0.51% | -0.37% | -0.28% | 0.00% | -0.03% | |
| GBP | -0.38% | 0.14% | 0.49% | -0.25% | -0.15% | 0.10% | 0.09% | |
| JPY | -0.90% | -0.51% | -0.49% | -0.79% | -0.64% | -0.45% | -0.24% | |
| CAD | -0.08% | 0.37% | 0.25% | 0.79% | 0.18% | 0.35% | 0.53% | |
| AUD | -0.22% | 0.28% | 0.15% | 0.64% | -0.18% | 0.26% | 0.24% | |
| NZD | -0.44% | -0.00% | -0.10% | 0.45% | -0.35% | -0.26% | -0.00% | |
| CHF | -0.45% | 0.03% | -0.09% | 0.24% | -0.53% | -0.24% | 0.00% |
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 UK's Office for National Statistics (ONS) reported on Tuesday that the ILO Unemployment Rate edged lower to 4.1% in the three months to July from 4.2%, as expected. The Employment Change came in at 265K in the same period, up sharply from 97,000 previously, while the annual wage inflation, as measured by the change in the Average Earnings Excluding Bonus, declined to 5.1% from 5.4%.
Although the UK labor market data helps Pound Sterling find a foothold, the risk-averse market atmosphere doesn't allow GBP/USD to gain traction. At the time of press, the UK's FTSE 100 Index was down nearly 0.5% on the day.
The US economic calendar will not feature any high-impact data releases on Tuesday. Hence, GBP/USD could struggle to attract bulls in case markets remain cautious in the American session. On Wednesday, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for August.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40 after recovering from below-30, suggesting that GBP/USD's latest recovery was a technical correction.
On the downside, 1.3040 (Fibonacci 38.2% retracement level of the latest uptrend) aligns as next support before 1.3000 (psychological level, static level) and 1.2965-1.2970 (Fibonacci 50% retracement, 200-period SMA).
Interim resistance aligns at 1.3100 (static level) before 1.3130, where the 20-period, 50-period and the 100-period Simple Moving Averages meet the Fibonacci 23.6% retracement. If GBP/USD manages to clear that hurdle, it could extend its recovery toward 1.3200 (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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