GBP/USD Forecast: Buyers get discouraged as Pound Sterling struggles to hold above 1.3000
- GBP/USD retreats from 2024-high set on Wednesday, trades below 1.3000.
- The near-term technical outlook points to a loss of bullish momentum.
- Weekly Initial Jobless Claims data will be featured in the US economic docket.
GBP/USD gathered bullish momentum and set a new 2024-high at 1.3045 on Wednesday. The pair, however, lost its traction early Thursday and declined below 1.3000.
British Pound PRICE This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.01% | -1.08% | 0.22% | 0.73% | 0.64% | -1.14% | |
| EUR | 0.19% | 0.23% | -0.70% | 0.60% | 0.95% | 1.03% | -0.76% | |
| GBP | 0.00% | -0.23% | -0.83% | 0.38% | 0.73% | 0.76% | -0.97% | |
| JPY | 1.08% | 0.70% | 0.83% | 1.30% | 1.60% | 1.70% | -0.24% | |
| CAD | -0.22% | -0.60% | -0.38% | -1.30% | 0.44% | 0.43% | -1.36% | |
| AUD | -0.73% | -0.95% | -0.73% | -1.60% | -0.44% | 0.07% | -1.69% | |
| NZD | -0.64% | -1.03% | -0.76% | -1.70% | -0.43% | -0.07% | -1.78% | |
| CHF | 1.14% | 0.76% | 0.97% | 0.24% | 1.36% | 1.69% | 1.78% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Pound Sterling gathered strength midweek after the UK data showed that services inflation remained sticky in June. Early Thursday, the UK's Office for National Statistics reported that the ILO Unemployment Rate remained unchanged at 4.4% in the three months to May, matching the market expectation. The details of the report showed that the wage inflation, as measured by the change in the Average Earnings Including Bonus, declined to 5.7% from 5.9%. GBP/USD started to edge lower following these figures.
In the second half of the day, the US Department of Labor will release the weekly Initial Jobless Claims data. Investors see the number of first-time applications for unemployment benefits to rising to 230,000 from 222,000 in the previous week.
A bigger-than-forecast print could remind investors of loosening conditions in the US labor market. With markets fully pricing in a 25 basis points Federal Reserve (Fed) rate cut in September, however, the reaction could remain short-lived.
Investors will also continue to pay close attention to comments from Fed policymakers before the blackout period starts this Saturday.
GBP/USD Technical Analysis
The lower limit of the ascending regression channel coming from early July aligns as immediate support at 1.2980. Meanwhile, the Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 50, reflecting a loss of bullish momentum.
1.2940 (Fibonacci 23.6% retracement of the latest uptrend) could be seen as next support before 1.2900 (psychological level, static level), in case 1.2980 support fails. On the upside, 1.3000 (psychological level, static level) aligns as first resistance before 1.3040-1.3050 (static level, mid-point of the ascending channel) and 1.3100 (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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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
