- GBP/USD climbs to 1.2780, supported by improved risk appetite and technical indicators pointing upward.
- Buyers target resistance at 1.2800; surpassing this could expose further key levels including the 200-day SMA at 1.2820.
- Downside risks persist with potential support at the December 2 low of 1.2616 and November 22 low at 1.2486 if declines resume.
The British Pound registered gains of 0.33% against the Greenback on Monday, despite the lack of a catalyst aside from an improvement in risk appetite. The GBP/USD trades at 1.2780 after bouncing off daily lows of 1.2716.
GBP/USD Price Forecast: Technical outlook
The GBP/USD is printing a leg-up following the over 4% loss following the US Presidential Elections, which witnessed President-elect Donald Trump's victory. Momentum shifted bullish, as shown by the Relative Strength Index (RSI), which turned bullish and aimed upwards.
Buyers must clear the 1.2800 figure before challenging the 200-day Simple Moving Average (SMA) at 1.2820. If surpassed, the next stop would be the 50-day SMA at 1.2878, 1.2900, and the 100-day SMA at 1.2963.
Conversely, if sellers keep the GBP/USD from reaching 1.2800 and drag towards the 1.2700 figure, it would exert downward pressure on the pair. A breach of the latter will expose the December 2 swing low of 1.2616, followed by the November 22 major support at 1.2486.
GBP/USD Price Chart – Daily
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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