GBP/USD Forecast: Pound Sterling buyers could remain interested while 1.2630 support holds
- GBP/USD fluctuates near 1.2650 after closing in the red on Thursday.
- Technical buyers could look to retain control while 1.2630 holds as support.
- Investors await comments from Federal Reserve officials ahead of the weekend.
GBP/USD staged a technical correction and closed in negative territory on Thursday after rising 0.75 on Wednesday. The pair continues to edge lower early Friday and was last seen trading near 1.2650.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.72% | -1.00% | 0.09% | -0.26% | -0.78% | -1.35% | 0.26% | |
| EUR | 0.72% | -0.33% | 0.81% | 0.44% | -0.10% | -0.65% | 0.97% | |
| GBP | 1.00% | 0.33% | 1.08% | 0.78% | 0.24% | -0.32% | 1.31% | |
| JPY | -0.09% | -0.81% | -1.08% | -0.38% | -0.85% | -1.50% | 0.20% | |
| CAD | 0.26% | -0.44% | -0.78% | 0.38% | -0.50% | -1.11% | 0.43% | |
| AUD | 0.78% | 0.10% | -0.24% | 0.85% | 0.50% | -0.66% | 1.07% | |
| NZD | 1.35% | 0.65% | 0.32% | 1.50% | 1.11% | 0.66% | 1.63% | |
| CHF | -0.26% | -0.97% | -1.31% | -0.20% | -0.43% | -1.07% | -1.63% |
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).
Comments from Federal Reserve (Fed) officials helped the US Treasury bond yields rebound and supported the US Dollar (USD) on Thursday.
Atlanta Fed President Raphael Bostic acknowledged the inflation progress in April but noted that the Fed was not yet there to start easing the policy. On a similar tone, Cleveland Fed President Loretta Mester noted that the monetary policy was well-positioned while they look to review more data and Richmond Fed President Thomas Barking Told CNBC that the latest Consumer Price Index (CPI) data showed that inflation was not where the Fed was trying to get.
In the meantime, the US Department of Labor reported that there were 222,000 weekly Initial Jobless Claims in the week ending May 11, down from 232,000 in the previous week.
Ahead of the weekend, Minneapolis Fed President Neel Kashkari, Fed Governor Christopher Waller and San Francisco Fed President Mary Daly are expected to deliver speeches. In case Fed officials refrain from hinting at a policy pivot in September, the USD could stay resilient in the American session and limit GBP/USD's upside.
GBP/USD Technical Analysis
The 100-day Simple Moving Average (SMA) aligns as key support for GBP/USD at 1.2630. If the pair tests this level and confirms it as support, technical buyers could take action. In this scenario, resistances could be seen at 1.2700, 1.2760 (Fibonacci 78.6% retracement of the latest downtrend) and 1.2800 (psychological level, static level).
A daily close below 1.2630 could attract sellers and open the door for an extended correction toward 1.2600 (50-day SMA) and 1.2540 (200-day SMA).
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.
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.
