- GBP/USD softens to around 1.2910 in Monday’s early European session.
- The negative view of the pair prevails below the 100-day EMA, with a bearish RSI indicator.
- The initial support level for the pair emerges at 1.2875; the immediate resistance level is located at 1.2983.
The GBP/USD pair weakens to near 1.2910 during the early European session on Monday. The stronger US Dollar (USD) following Donald Trump’s election win continues to undermine the major pair as traders expect inflationary impulses will keep the US Federal Reserve (Fed) from cutting rates as much as they otherwise would have.
On the other hand, the Bank of England (BoE) reiterated that “a gradual approach to removing policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long.” Less dovish remarks from the UK central bank could help limit the GBP’s losses in the near term.
According to the daily chart, GBP/USD keeps the bearish vibe unchanged on the daily timeframe, with the price holding below the key 100-day Exponential Moving Average (EMA). Furthermore, the downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which is located below the midline around 43.85, indicating the path of least resistance is to the downside.
The initial support level for GBP/USD emerges at 1.2875, the low of November 7. Further south, the next contention level is located in the 1.2850-1.2840 zone, representing the lower limit of the Bollinger Band and the low of October 31.
On the bright side, the 100-day EMA at 1.2983 acts as an immediate resistance level for the major pair. The crucial upside barrier is seen at the 1.3000 psychological level. A decisive break above this level could see a rally to 1.3048, the high of November 6.
GBP/USD daily chart
(This story was corrected on November 11 at 09:06 GMT to say that less dovish remarks from the UK central bank could help limit the GBP’s losses, not INR's losses.)
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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