- GBP/USD bulls turn cautious amid the emergence of some USD buying on Thursday.
- The divergent BoE-Fed policy expectations might continue to lend support to the pair.
- The technical setup warrants caution for bulls and before positioning for further gains.
The GBP/USD pair oscillates in a narrow band during the Asian session on Thursday and remains within striking distance of its highest level since July 2023, around the 1.3120 area touched the previous day. Spot prices currently trade around the 1.3085 region, nearly unchanged for the day, as traders now look to the flash PMIs from the UK and the US for short-term opportunities.
In the meantime, a modest uptick in the US Treasury bond yields assists the US Dollar (USD) in recovering a bit from the YTD low touched on Wednesday. This, in turn, is seen as a key factor acting as a headwind for the GBP/USD pair, though diminishing odds for another interest rate cut by the Bank of England (BoE) in September lend some support. Furthermore, increasing bets for a more aggressive policy easing by the Federal Reserve (Fed) should cap gains for the buck and contribute to limiting losses for the currency pair.
From a technical perspective, this week's sustained breakout through the 1.3000 psychological mark and a subsequent move beyond the previous YTD peak, around the 1.3045 region was seen as a fresh trigger for bullish traders. That said, oscillators on the daily chart have moved on the verge of breaking into the overbought zone, making it prudent to wait for some near-term consolidation or a modest pullback before positioning for any further appreciating move. Nevertheless, the bias remains tilted firmly in favor of bulls.
Hence, any further slide towards the 1.3050-1.3045 region could be seen as a buying opportunity and remain cushioned near the 1.3000 round figure. The latter should act as a key pivotal point, which if broken decisively might prompt some technical selling and drag the GBP/USD pair to the next relevant support near the 1.2950 area en route to the 1.2900 mark. Failure to defend the said support levels might suggest that spot prices have topped out in the near term and pave the way for some meaningful corrective decline.
On the flip side, the 1.3120 area, or the YTD peak touched on Wednesday, could act as an immediate hurdle ahead of the 2023 swing high, near the 1.3140 region. Some follow-through buying will reaffirm the constructive setup and set the stage for an extension of the recent strong uptrend witnessed over the two weeks or so. The GBP/USD pair might then aim to surpass the 1.3200 round figure and test the 1.3225-1.3230 resistance zone.
GBP/USD daily chart
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds near 1.1150 after mixed EU PMI data
![EUR/USD holds near 1.1150 after mixed EU PMI data](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/iStock-919003044_XtraSmall.jpg)
EUR/USD fluctuates at around 1.1150 in the European session on Thursday. Composite PMI in Germany dropped to 48.5 in August's flash estimate from 49.1 in July but the Eurozone Composite PMI improved to 51.2 in the same period, limiting the Euro's losses.
GBP/USD stays above 1.3100 following upbeat UK PMI figures
![GBP/USD stays above 1.3100 following upbeat UK PMI figures](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/GBPUSD/cash-334064_XtraSmall.jpg)
GBP/USD holds its ground and trades marginally higher on the day above 1.3100 in the European trading hours. The S&P Global/CIPS Composite PMI in the UK rose to 53.4 in August from 52.8, pointing to an ongoing growth in the private sector and supporting Pound Sterling.
Gold price remains confined in a range below all-time peak, awaits Fed's Powell on Friday
![Gold price remains confined in a range below all-time peak, awaits Fed's Powell on Friday](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/safe-investment-gm147322399-17568598_XtraSmall.jpg)
Gold price remains on the defensive heading into the European session on Thursday, albeit holds above the $2,500 psychological mark and remains within the striking distance of the all-time peak touched earlier this week.
MATIC price poised for rally as on-chain data shows a positive bias
![MATIC price poised for rally as on-chain data shows a positive bias](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/Polygon/polygon-200x200-637526942732422088_XtraSmall.jpg)
Polygon's (MATIC) price has risen 27% since the start of this week and, as of Thursday, is continuing to trade higher by 0.5% at $0.52. On-chain data shows that MATIC's TVL is rising.
US S&P Global PMIs seen broadly unchanged in August, signaling moderate economic expansion
![US S&P Global PMIs seen broadly unchanged in August, signaling moderate economic expansion](https://editorial.fxstreet.com/images/Resources/Discover/Discover_25_1_XtraSmall.png)
S&P Global will publish the preliminary estimates of the US PMIs for August on Thursday. The indexes are the result of surveys of the senior executives in the private sector and are meant to indicate the overall health of an economy.
Moneta Markets review 2024: All you need to know
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.