GBP/USD Weekly Forecast: Pound Sterling tests key support ahead of a big week
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UPGRADE- Pound Sterling corrects sharply as US Dollar demand returns with a bang.
- GBP/USD looks to high-impact US and UK data for a fresh directional impetus.
- Technically, GBP/USD challenged key 61.8% Fibo support, RSI stays neutral - what’s next?
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Pound Sterling gave in to the USD resurgence
GBP/USD faced a double whammy during the week, with resurgent haven demand for the US Dollar (USD) on one hand. While the dovish Bank of England (BoE) interest rate on hold decision smashed the pair on the other hand.
In doing so, the pair reversed a majority of gains seen from the beginning of this year, extending the correction from over four-year highs of 1.3869 reached on January 27.
The Greenback attracted haven demand as markets embarked on a solid rotation spree, with capital flowing out of overvalued and growth assets, such as tech stocks, Gold, Silver etc., into value assets and undermined ones like the USD.
Markets resorted to ‘sell-everything’ mode as the AI rout deepened, boosting the USD recovery against its six major currency rivals. The end of the partial government shutdown on Tuesday also helped the buck maintain its ground, despite a slew of weak US labor data and concerns over the US Federal Reserve’s (Fed) monetary policy outlook under the leadership of Kevin Warsh.
The Automatic Data Processing (ADP) Research Institute said on Wednesday, private sector employment in the US rose 22,000 in January, against a forecast of 48,000. Meanwhile, Initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 231,000 for the week ended January 31, the Labor Department said on Thursday.
“The US December JOLTS report shows a steep drop-off in job openings to 6.54 million from a downwardly revised 6.93 million level in November,” according to ING Bank.
In the second half of the week, the dovish BoE storm pounded the Pound Sterling further. The UK central bank kept interest rates on hold at 3.75% in February.
The BoE nine-member Monetary Policy Committee (MPC) voted by a slim 5:4 majority to keep rates steady. Four members voted to lower rates.
Expectations of a sharp drop in inflation in the coming months also added to the dovish BoE outlook, fueling bets for a rate cut as early as next month.
Key US and UK economic data to watch out for
In light of the dovish tilt, the focus is now on a series of speeches from BoE policymakers, with Governor Andrew Bailey’s appearance late Sunday eagerly awaited.
A slew of Fed and BoE officials are also set to speak on Tuesday, with Monday being a data-light day.
Tuesday will also feature the US Retail Sales report and the quarterly Employment Cost Index.
On Wednesday, the delayed US January jobs data will be published, with key focus on the headline Nonfarm Payrolls print.
The quarterly and monthly Gross Domestic Product (GDP) data will be released from the United Kingdom (UK) on Thursday, followed by the US Jobless Claims data.
On Friday, BoE Chief Economist Huw Pill will participate in a fireside chat at an event hosted by Santander Bank in London ahead of the critical US Consumer Price Index (CPI) inflation report.
Besides these economic events, geopolitics will continue to grab attention amid US President Donald Trump’s erratic international policies.
GBP/USD Technical Analysis
The 21-, 50-, 100- and 200-day Simple Moving Averages (SMA) all rise, with the shorter ones positioned above the longer, reinforcing buyers’ control. Price holds above these markers, with the 21-day SMA at 1.3564 offering nearby dynamic support. The Relative Strength Index (RSI) stands at 51 (neutral) and has edged higher, hinting stabilizing momentum. Measured from the 1.3346 low to the 1.3868 high, the 61.8% retracement at 1.3545 offers a floor, while the 50.0% retracement at 1.3607 is the level bulls would seek to reclaim to extend the advance.
Shorter SMAs continue to advance over the medium-term ones, and the broader set trends higher, underpinning an upward bias. The pair trades above the 50-day SMA at 1.3475 and the 200-day SMA at 1.3430, keeping dip-buying interest intact. RSI near 51 remains neutral; a firm move above 60 would strengthen the upside impulse. On setbacks, the 100-day SMA at 1.3379 would serve as the next layer of support.
(The technical analysis of this story was written with the help of an AI tool.)
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
- Pound Sterling corrects sharply as US Dollar demand returns with a bang.
- GBP/USD looks to high-impact US and UK data for a fresh directional impetus.
- Technically, GBP/USD challenged key 61.8% Fibo support, RSI stays neutral - what’s next?
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Pound Sterling gave in to the USD resurgence
GBP/USD faced a double whammy during the week, with resurgent haven demand for the US Dollar (USD) on one hand. While the dovish Bank of England (BoE) interest rate on hold decision smashed the pair on the other hand.
In doing so, the pair reversed a majority of gains seen from the beginning of this year, extending the correction from over four-year highs of 1.3869 reached on January 27.
The Greenback attracted haven demand as markets embarked on a solid rotation spree, with capital flowing out of overvalued and growth assets, such as tech stocks, Gold, Silver etc., into value assets and undermined ones like the USD.
Markets resorted to ‘sell-everything’ mode as the AI rout deepened, boosting the USD recovery against its six major currency rivals. The end of the partial government shutdown on Tuesday also helped the buck maintain its ground, despite a slew of weak US labor data and concerns over the US Federal Reserve’s (Fed) monetary policy outlook under the leadership of Kevin Warsh.
The Automatic Data Processing (ADP) Research Institute said on Wednesday, private sector employment in the US rose 22,000 in January, against a forecast of 48,000. Meanwhile, Initial claims for state unemployment benefits jumped 22,000 to a seasonally adjusted 231,000 for the week ended January 31, the Labor Department said on Thursday.
“The US December JOLTS report shows a steep drop-off in job openings to 6.54 million from a downwardly revised 6.93 million level in November,” according to ING Bank.
In the second half of the week, the dovish BoE storm pounded the Pound Sterling further. The UK central bank kept interest rates on hold at 3.75% in February.
The BoE nine-member Monetary Policy Committee (MPC) voted by a slim 5:4 majority to keep rates steady. Four members voted to lower rates.
Expectations of a sharp drop in inflation in the coming months also added to the dovish BoE outlook, fueling bets for a rate cut as early as next month.
Key US and UK economic data to watch out for
In light of the dovish tilt, the focus is now on a series of speeches from BoE policymakers, with Governor Andrew Bailey’s appearance late Sunday eagerly awaited.
A slew of Fed and BoE officials are also set to speak on Tuesday, with Monday being a data-light day.
Tuesday will also feature the US Retail Sales report and the quarterly Employment Cost Index.
On Wednesday, the delayed US January jobs data will be published, with key focus on the headline Nonfarm Payrolls print.
The quarterly and monthly Gross Domestic Product (GDP) data will be released from the United Kingdom (UK) on Thursday, followed by the US Jobless Claims data.
On Friday, BoE Chief Economist Huw Pill will participate in a fireside chat at an event hosted by Santander Bank in London ahead of the critical US Consumer Price Index (CPI) inflation report.
Besides these economic events, geopolitics will continue to grab attention amid US President Donald Trump’s erratic international policies.
GBP/USD Technical Analysis
The 21-, 50-, 100- and 200-day Simple Moving Averages (SMA) all rise, with the shorter ones positioned above the longer, reinforcing buyers’ control. Price holds above these markers, with the 21-day SMA at 1.3564 offering nearby dynamic support. The Relative Strength Index (RSI) stands at 51 (neutral) and has edged higher, hinting stabilizing momentum. Measured from the 1.3346 low to the 1.3868 high, the 61.8% retracement at 1.3545 offers a floor, while the 50.0% retracement at 1.3607 is the level bulls would seek to reclaim to extend the advance.
Shorter SMAs continue to advance over the medium-term ones, and the broader set trends higher, underpinning an upward bias. The pair trades above the 50-day SMA at 1.3475 and the 200-day SMA at 1.3430, keeping dip-buying interest intact. RSI near 51 remains neutral; a firm move above 60 would strengthen the upside impulse. On setbacks, the 100-day SMA at 1.3379 would serve as the next layer of support.
(The technical analysis of this story was written with the help of an AI tool.)
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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