GBP/USD Forecast: Buyers hesitate as Pound Sterling fails to stabilize above 1.3400
- GBP/USD moves sideways below 1.3400 in the European session on Tuesday.
- The US Dollar holds its ground following Monday's sharp decline.
- The pair remains technically bullish in the near term.
GBP/USD moves up and down in a tight range below 1.3400 after having set a fresh 2025-high above 1.3420 earlier in the day. The pair's near-term technical outlook suggests that the bullish stance remains unchanged but a break below 1.3340-1.3330 could discourage buyers.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.92% | -0.60% | -1.33% | -0.14% | -0.34% | -1.29% | -0.74% | |
| EUR | 0.92% | 0.18% | -0.44% | 0.75% | 0.40% | -0.40% | 0.16% | |
| GBP | 0.60% | -0.18% | -0.45% | 0.58% | 0.21% | -0.58% | -0.02% | |
| JPY | 1.33% | 0.44% | 0.45% | 1.20% | 0.86% | 0.15% | 0.63% | |
| CAD | 0.14% | -0.75% | -0.58% | -1.20% | -0.33% | -1.15% | -0.60% | |
| AUD | 0.34% | -0.40% | -0.21% | -0.86% | 0.33% | -0.78% | -0.22% | |
| NZD | 1.29% | 0.40% | 0.58% | -0.15% | 1.15% | 0.78% | 0.59% | |
| CHF | 0.74% | -0.16% | 0.02% | -0.63% | 0.60% | 0.22% | -0.59% |
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).
The broad-based US Dollar (USD) weakness allowed GBP/USD to begin the week on a bullish note as investors reassessed the political threat to the Federal Reserve's (Fed) independence.
US President Donald Trump took to social media on Monday to criticize the Fed's policy decisions, after White House economic adviser Kevin Hassett said on Friday that Trump and his team were continuing to study if firing Fed Chairman Jerome Powell was an option in a way that it wasn't before.
Trump argued that there was "virtually no inflation" in the US and said that there could be a slowing of the economy if the Fed doesn't lower interest rates. He also called Powell "Mr. Too late" and accused him of cutting rates in late 2024 for political reasons.
The USD Index, which gauges the USD's performance against a basket of six major currencies, lost more than 1% on Monday.
In the absence of high-impact macroeconomic data releases, investors will continue to pay close attention to political headlines and comments from Fed officials. The USD could hold its ground and cause GBP/USD to correct lower if Fed policymakers reiterate the importance of an independent Fed and reassure markets that they will not be influenced by politics. On the flip side, investors could look to move away from the USD in case Trump, or officials from his administration, carry on with their call for rate cuts and Powell's ousting.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, suggesting that the bullish bias remains intact. However, if GBP/USD drops below 1.3340-1.3330 (lower limit of the ascending regression channel, 20-period Simple Moving Average), technical sellers could show interest. In this scenario, 1.3280 (static level) could be seen as next support before 1.3230 (50-period Simple Moving Average).
Looking north, first resistance could be spotted at 1.3420 (static level) ahead of 1.3460 (mid-point of the ascending channel) and 1.3500 (static level, round level).
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, 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).
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.
