GBP/USD Forecast: Pound Sterling turns fragile as focus shifts to US data
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UNLOCK OFFER- GBP/USD declined below 1.2800 after snapping a six-day winning streak on Monday.
- The pair could extend its downward correction unless it manages to reclaim 1.2800.
- Annual CPI inflation in the US is forecast to hold steady at 3.1% in February.
GBP/USD came under bearish pressure on Monday and registered daily losses for the first time this month. The pair stays on the back foot early Tuesday and trades in negative territory below 1.2800 ass market focus shifts to US February inflation data.
The negative shift seen in risk mood made it difficult for Pound Sterling to hold its ground against the US Dollar (USD) on Monday.
The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate rose to 3.9% in three months to January from 3.8%. Employment Change was down 21,000 in January following the 72,000 increase recorded in December. Finally, annual wage inflation, as measured by the Average Earnings Excluding Bonus, edged lower to 6.1% from 6.2%. These data failed to trigger a noticeable reaction in GBP/USD.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.16% | 0.55% | -0.07% | 0.17% | 0.42% | 0.28% | -0.13% | |
| EUR | -0.15% | 0.40% | -0.24% | 0.01% | 0.27% | 0.13% | -0.27% | |
| GBP | -0.55% | -0.39% | -0.63% | -0.38% | -0.13% | -0.27% | -0.68% | |
| CAD | 0.09% | 0.24% | 0.63% | 0.24% | 0.48% | 0.36% | -0.05% | |
| AUD | -0.17% | -0.01% | 0.38% | -0.25% | 0.25% | 0.11% | -0.31% | |
| JPY | -0.40% | -0.26% | 0.38% | -0.49% | -0.24% | -0.13% | -0.54% | |
| NZD | -0.28% | -0.12% | 0.27% | -0.36% | -0.11% | 0.14% | -0.40% | |
| CHF | 0.13% | 0.29% | 0.68% | 0.06% | 0.30% | 0.54% | 0.41% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Later in the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) figures for February. On a yearly basis, the CPI is forecast to rise 3.1% and match January's increase. On a monthly basis, the Core CPI, which excludes volatile food and energy prices, is expected to rise 0.3%.
February inflation data might not be able to alter the market pricing of the Federal Reserve's interest rate outlook. Nevertheless, a stronger-than-expected increase in the monthly Core CPI could help the USD gather strength with the immediate reaction.
In the meantime, the UK's FTSE 100 is up 0.8% in the early trade and US stock index futures trade modestly higher. If the risk mood continues to improve, GBP/USD's losses could remain limited.
GBP/USD Technical Analysis
GBP/USD declined below the mid-point of the ascending regression channel and the Relative Strength Index (RSI) on the 4-hour chart retreated below 50, highlighting a loss of bullish momentum.
On the downside, 1.2750 (Fibonacci 38.2% retracement of the latest uptrend) aligns as first support before 1.2730-1.2720 (50-period Simple Moving Average (SMA), lower limit of the ascending channel) and 1.2690 (100-period SMA).
First resistance is located at 1.2800 (Fibonacci 23.6% retracement) before 1.2850 (static level) and 1.2870 (upper limit of the ascending channel).
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.
- GBP/USD declined below 1.2800 after snapping a six-day winning streak on Monday.
- The pair could extend its downward correction unless it manages to reclaim 1.2800.
- Annual CPI inflation in the US is forecast to hold steady at 3.1% in February.
GBP/USD came under bearish pressure on Monday and registered daily losses for the first time this month. The pair stays on the back foot early Tuesday and trades in negative territory below 1.2800 ass market focus shifts to US February inflation data.
The negative shift seen in risk mood made it difficult for Pound Sterling to hold its ground against the US Dollar (USD) on Monday.
The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate rose to 3.9% in three months to January from 3.8%. Employment Change was down 21,000 in January following the 72,000 increase recorded in December. Finally, annual wage inflation, as measured by the Average Earnings Excluding Bonus, edged lower to 6.1% from 6.2%. These data failed to trigger a noticeable reaction in GBP/USD.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.16% | 0.55% | -0.07% | 0.17% | 0.42% | 0.28% | -0.13% | |
| EUR | -0.15% | 0.40% | -0.24% | 0.01% | 0.27% | 0.13% | -0.27% | |
| GBP | -0.55% | -0.39% | -0.63% | -0.38% | -0.13% | -0.27% | -0.68% | |
| CAD | 0.09% | 0.24% | 0.63% | 0.24% | 0.48% | 0.36% | -0.05% | |
| AUD | -0.17% | -0.01% | 0.38% | -0.25% | 0.25% | 0.11% | -0.31% | |
| JPY | -0.40% | -0.26% | 0.38% | -0.49% | -0.24% | -0.13% | -0.54% | |
| NZD | -0.28% | -0.12% | 0.27% | -0.36% | -0.11% | 0.14% | -0.40% | |
| CHF | 0.13% | 0.29% | 0.68% | 0.06% | 0.30% | 0.54% | 0.41% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Later in the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) figures for February. On a yearly basis, the CPI is forecast to rise 3.1% and match January's increase. On a monthly basis, the Core CPI, which excludes volatile food and energy prices, is expected to rise 0.3%.
February inflation data might not be able to alter the market pricing of the Federal Reserve's interest rate outlook. Nevertheless, a stronger-than-expected increase in the monthly Core CPI could help the USD gather strength with the immediate reaction.
In the meantime, the UK's FTSE 100 is up 0.8% in the early trade and US stock index futures trade modestly higher. If the risk mood continues to improve, GBP/USD's losses could remain limited.
GBP/USD Technical Analysis
GBP/USD declined below the mid-point of the ascending regression channel and the Relative Strength Index (RSI) on the 4-hour chart retreated below 50, highlighting a loss of bullish momentum.
On the downside, 1.2750 (Fibonacci 38.2% retracement of the latest uptrend) aligns as first support before 1.2730-1.2720 (50-period Simple Moving Average (SMA), lower limit of the ascending channel) and 1.2690 (100-period SMA).
First resistance is located at 1.2800 (Fibonacci 23.6% retracement) before 1.2850 (static level) and 1.2870 (upper limit of the ascending channel).
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.
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