GBP/USD Forecast: Pound Sterling bulls refuse to give in
- GBP/USD holds steady near 1.2950 in the European session on Thursday.
- The near-term technical outlook suggests that the bullish bias remains unchanged.
- Markets await February Producer Price Index (PPI) data from the US.
After posting small gains on Wednesday, GBP/USD stays relatively quiet in the European session on Thursday and fluctuates in a tight channel at around 1.2950. The pair's near-term technical outlook is yet to offer any clues about a bearish reversal.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.45% | -0.25% | 0.09% | 0.05% | 0.24% | 0.26% | 0.21% | |
| EUR | 0.45% | 0.15% | 0.52% | 0.51% | 0.79% | 0.68% | 0.54% | |
| GBP | 0.25% | -0.15% | 0.31% | 0.32% | 0.63% | 0.47% | 0.45% | |
| JPY | -0.09% | -0.52% | -0.31% | -0.05% | 0.21% | 0.08% | 0.19% | |
| CAD | -0.05% | -0.51% | -0.32% | 0.05% | 0.16% | 0.20% | 0.13% | |
| AUD | -0.24% | -0.79% | -0.63% | -0.21% | -0.16% | -0.10% | -0.19% | |
| NZD | -0.26% | -0.68% | -0.47% | -0.08% | -0.20% | 0.10% | 0.03% | |
| CHF | -0.21% | -0.54% | -0.45% | -0.19% | -0.13% | 0.19% | -0.03% |
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).
Following a sharp decline that lasted seven days, the US Dollar (USD) Index, which tracks the USD's performance against a basket of six major currencies, registered modest gains on Wednesday. Soft inflation data for February may have eased fears over a stagflation in the US and provided a short-lasting support to the currency.
Early Thursday, US stock index futures trade in negative territory, pointing to a cautious market mood. In case safe-haven flows dominate the action in financial markets in the second half of the day, GBP/USD could have a hard time gaining traction.
In the meantime, the US economic calendar will feature Producer Price Index (PPI) data for February. On a monthly basis, the PPI is forecast to rise 0.3% following the 0.4% increase recorded in January. A stronger-than-forecast monthly PPI print could support the USD with the immediate reaction.
In the European morning on Friday, the UK's Office for National Statistics will publish the monthly Gross Domestic Product data for January, alongside Industrial Production and Manufacturing Production figures.
GBP/USD Technical Analysis
GBP/USD continues to trade in the upper half of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart holds near 60, suggesting that the bullish stance remains intact.
A pivot level seems to have formed at 1.2950. Once this level is confirmed as support, 1.3000 (round level, static level, upper limit of the ascending channel) could be seen as next resistance before 1.3040 (static level). On the downside, supports could be seen at 1.2900 (static level, round level), 1.2850 (mid-point of the ascending channel) and 1.2800 (200-day Simple Moving Average).
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.
