GBP/USD heads into a thin Friday on a quiet note

GBP/USD is treading water near 1.2700 with a quiet Friday on the docket.
Data is thin on both sides of the Atlantic to wrap up the trading week.
BoE”s FSR is unlikely to move the needle on Friday, markets await next week’s NFP.

Joshua Gibson FXStreet

GBP/USD saw a quiet Thursday session, trading on the thin side and holding on near the 1.2700 handle. US markets were dark on Thursday for the Thanksgiving holiday, and Friday will also see shortened US trading hours, keeping the back half of the trading week on the low end of volumes overall.

The Bank of England’s (BoE) latest Financial Stability Report will drop on markets early during Friday’s upcoming US market session. The release is overwhelmingly unlikely to drive much momentum in Cable markets. However, traders should still be on the lookout for low-volume volatility spikes. With the US slated to have shortened trading hours on Friday, overall market liquidity will be even lower than usual, making it easier for outsized orders to shock bids.

Next week’s economic data docket bodes just as poorly for the Pound Sterling. Very little data of note is slated for release next week on the UK side, while traders will be hunkering down to wait for next Friday’s US Nonfarm Payrolls (NFP) jobs report, scheduled for December 6. Next week’s NFP will take on renewed importance for traders now that watching for signs of rate cuts from the Federal Reserve (Fed) has taken a backseat as of late. However, a large move in either direction in NFP figures could jolt Treasury rates, sparking fresh fears of either too many or too few rate cuts heading into 2025.

GBP/USD price forecast

The GBP/USD trend is downward biased, though the British Pound has made some recovery. For buyers to regain control, they need to break above 1.2714, the November 20 high, and the 200-day Simple Moving Average (SMA) at 1.2818. If these levels are surpassed, moving towards 1.3000 will be challenging due to a recent 'death cross' formation between the 50-day and 100-day SMAs.

Sellers must close below 1.2600 for a bearish continuation, which would expose the November 26 low at 1.2506, followed by last week's low of 1.2486. Overall, while the GBP/USD has a slight short-term upside, significant downside risks persist.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

EUR/USD trims gains, hovers around 1.1900 post-US data

EUR/USD trades slightly on the back foot around the 1.1900 region in a context dominated by the resurgence of some buying interest around the US Dollar on turnaround Tuesday. Looking at the US docket, Retail Sales disappointed expectations in December, while the ADP 4-Week Average came in at 6.5K.

GBP/USD comes under pressure near 1.3680

The better tone in the Greenback hurts the risk-linked complex on Tuesday, prompting GBP/USD to set aside two consecutive days of gains and trade slightly on the defensive below the 1.3700 mark. Investors, in the meantime, keep their attention on key UK data due later in the week.

Gold loses some traction, still above $5,000

Gold faces some selling pressure on Tuesday, surrendering part of its recent two-day advance although managing to keep the trade above the $5,000 mark per troy ounce. The daily pullback in the precious metal comes in response to the modest rebound in the US Dollar, while declining US Treasury yields across the curve seem to limit the downside.

XRP holds $1.40 amid ETF inflows and stable derivatives market

Ripple trades under pressure, with immediate support at $1.40 holding at the time of writing on Tuesday. A recovery attempt from last week’s sell-off to $1.12 stalled at $1.54 on Friday, leading to limited price action between the current support and the resistance.

Dollar drops and stocks rally: The week of reckoning for US economic data

Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.

Bitcoin Cash trades lower, risks dead-cat bounce amid bearish signals

Bitcoin Cash (BCH) trades in the red below $522 at the time of writing on Tuesday, after multiple rejections at key resistance. BCH’s derivatives and on-chain indicators point to growing bearish sentiment and raise the risk of a dead-cat bounce toward lower support levels.