GBP/USD Forecast: US election jitters could cap Pound Sterling's rebound
- GBP/USD trades modestly higher but remains below 1.3000.
- Investors could refrain from taking large positions on the day of the US presidential election.
- The near-term technical outlook points to a slightly bullish bias.
GBP/USD rose toward 1.3000 after starting the week with a bullish gap but retreated slightly in the second half of the day on Monday. The pair trades in positive territory in the European morning on Tuesday as investors grow anxious while gearing up for the United States (US) presidential election.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.53% | -0.48% | 0.05% | -0.28% | -0.89% | -0.27% | -0.52% | |
| EUR | 0.53% | 0.01% | 0.15% | -0.15% | -0.05% | -0.14% | -0.39% | |
| GBP | 0.48% | -0.01% | -0.12% | -0.16% | -0.07% | -0.15% | -0.40% | |
| JPY | -0.05% | -0.15% | 0.12% | -0.33% | -0.39% | -0.11% | -0.26% | |
| CAD | 0.28% | 0.15% | 0.16% | 0.33% | -0.40% | -0.00% | -0.23% | |
| AUD | 0.89% | 0.05% | 0.07% | 0.39% | 0.40% | -0.09% | -0.30% | |
| NZD | 0.27% | 0.14% | 0.15% | 0.11% | 0.00% | 0.09% | -0.24% | |
| CHF | 0.52% | 0.39% | 0.40% | 0.26% | 0.23% | 0.30% | 0.24% |
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 early Monday as some betting sites suggested that Vice President Kamala Harris could win the election. Later in the day, the bearish action seen in Wall Street helped the USD find demand as a safe-haven.
The ISM Services PMI report for October will be featured in the US economic calendar on Tuesday. Investors are likely to ignore this data and stay focused on exit polls and counting results coming from swing states.
According to RealClearPolling, the Ipsos poll has Harris leading by two points, 50 vs 48, and the Atlas Intel poll has Donald Trump leading by one, 50 vs 49, while the TIPP poll has them tied at 48. In some swing states, such as Nevada, Georgia and Pennsylvania, Harris seems to have closed the gap but Trump holds the lead in Arizona and North Carolina.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 50 but GBP/USD is yet to flip the 100-day Simple Moving Average (SMA), currently located at 1.2980, into support, suggesting that buyers remain hesitant.
On the downside, 1.2940 (static level) aligns as the first support ahead of 1.2900 (round level). If GBP/USD manages to stabilize above 1.2980, 1.3000 (static level, 20-day SMA) could act as interim resistance ahead of 1.3040 (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.
