- GBP/USD pressed into a new 13-month high on Tuesday.
- Pound Sterling continues to rally on broad-market Greenback weakness.
- Markets are tilting toward Thursday’s Jackson Hole Economic Symposium kickoff.
GBP/USD chalked in another third of a percent gain on Tuesday, squeezing out a fresh 13-month high and closing in the green for a third straight day as the Pound Sterling capitalizes on broad-market Greenback weakness. Market sentiment is holding on the high end ahead of key business activity survey results, and the upcoming kickoff of the Jackson Hole Economic Symposium.
Wednesday will give markets another opportunity to take a breather before high impact data gets underway in the back half of the trading week. UK Purchasing Managers Index (PMI) figures for August are expected to drift upwards slightly, with the UK Services PMI component forecast to tick up to 52.8 from 52.5. The Manufacturing section is expected to hold steady at 52.1.
US PMI business activity survey results are slated for release on Thursday, as well as the kickoff of the annual Jackson Hole Symposium which is set to run through the weekend. Wednesday will deliver the Federal Reserve’s (Fed) latest Meeting Minutes, but market forces will broadly be looking ahead to Thursday’s outings for reasons to move.
US S&P Global Manufacturing PMI activity expectations are forecast to hold steady at 49.6 in August, while the Services PMI component is expected to tick down a full point to 54.0 from 55.0. The kickoff of the Jackson Hole Symposium is expected to draw plenty of investor attention on Thursday, but Friday’s appearance from Fed Chairman Jerome Powell can be expected to set the overall tone of market sentiment heading into next week.
GBP/USD price forecast
Cable continues to grind its way higher with price action tapping a fresh 13-month peak bid just above 1.3050 on Tuesday. The pair has closed in the green for all but one of the last nine straight trading days.
However, failure by bulls to push even further beyond current levels could see a short pressure trap build as a double-top forms on daily candlesticks, and an overextended bullish push is looking at a long way to drop before running into the nearest technical barrier at the 50-day Exponential Moving Average (EMA) near 1.2806.
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 drops toward 1.1100, as USD recovers ahead of Fed Minutes
EUR/USD is on a slippering slope toward 1.1100, snapping a three-day winning streak in the European session on Wednesday. The pair is weighed down by resurgent US Dollar demand, as markets turn cautious ahead of the annual US NFP revisions and the Fed Minutes.
GBP/USD retreats toward 1.3000 on renewed US Dollar demand
GBP/USD is pulling back toward 1.3000 in European trading on Wednesday, having hit yearly highs at 1.3052 on Tuesday. The US Dollar finds fresh demand amid a tepid risk tone, as traders await the US NFP revisions and the Fed Minutes for fresh cues on the policy path.
Gold remains poised to test $2,550, with eyes on Fed Minutes
Gold price is on the front foot above $2,510 in Wednesday’s Asian trading, consolidating the previous upsurge to a new all-time high of $2,532. Gold traders take account of broad risk-aversion and refrain from placing fresh bets ahead of the Minutes of the Fed July meeting due later on Wednesday.
Bitcoin price consolidates in $57,000 to $62,000 band
Bitcoin and Ethereum prices are expected to drop after struggling to break through critical resistance levels, and momentum indicators show bearish biases. In contrast, Ripple is showing stability near its daily support level of $0.544, suggesting a possible rebound.
US Dollar extends losses, Gold shines
The dollar’s misery is making gold shine like a new penny. The precious metal advanced to a fresh record yesterday backed by the rising expectation of Fed cuts and the lower US yields.