GBP/USD rises above 1.2600 on weak US jobs data

GBP/USD climbs as soft US jobless claims data weakens the Greenback.
UK inflation above 3% reduces the odds of aggressive BoE rate cuts.
Traders eye Fed speakers and potential US-China trade deal signals.

Christian Borjon Valencia FXStreet

The Pound Sterling (GBP) climbs against the US Dollar (USD) and crosses the 1.2600 figure on Thursday, with traders awaiting the release of United Kingdom (UK) Retail Sales data. Meanwhile, a soft United States (US) jobs report weakened the US Dollar. The GBP/USD pair trades at 1.2616, up 0.25%.

Sterling gains 0.25% ahead of UK Retail Sales release

The Cable failed to rally on Wednesday as inflation rose above 3% in January, weakening the case for further interest rate cuts by the Bank of England (BoE). Meanwhile, US President Donald Trump's tariffs rhetoric continues.

Developments in the Russia–Ukraine conflict continued to grab the headlines as Trump called Ukrainian President Volodymyr Zelenskiy a dictator, who questioned discussions of a ceasefire held between Russia and the US in Saudi Arabia.

Market participants cheered the chance of a new trade deal between the US and China. Trump said, “It’s possible,” adding that Chinese President Xi Jinping to visit the US but failed to provide a date.

Data-wise, the US economic docket featured the release of US Initial Jobless Claims for the week ending February 15, which came at 219K, up from 214K, exceeding forecasts of 215.

Ahead in the day, GBP/USD traders would eye Fed speakers. Chicago’s Fed Austan Goolsbee, St. Louis Fed Alberto Musalem, and Governors Michael Barr and Adriana Kugler will cross the wires.

GBP/USD Price Forecast: Technical outlook

GBP/USD is neutral to slightly upward biased after registering a successive series of higher highs and higher lows, alongside strong bullish momentum, as depicted by the Relative Strength Index (RSI). However, if buyers want to regain control they must clear the 100-day Simple Moving Average (SMA) at 1.2664, followed by the 200-day SMA at 1.2787.

On the other hand, if sellers drag the exchange rate below 1.2600, the trend could turn downwards if they surpass 1.2500, followed by the 50-day SMA at 1.2461.

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

Christian Borjon Valencia

FXStreet

Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.

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