GBP/USD Forecast: Pound Sterling buyers hesitate as key resistance holds
- GBP/USD stays in a consolidation phase near 1.2700 on Tuesday.
- The near-term technical outlook points to a bullish tilt.
- Buyers could refrain from betting on an extended GBP/USD rebound unless 1.2700 turns into support.
GBP/USD gathered recovery momentum and gained more than 0.3% on Monday, snapping a two-day losing streak. The pair holds steady near 1.2700 in the European session on Tuesday and technical buyers could look to retain control once this level is confirmed as support.
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 | -0.33% | -0.38% | -0.18% | -0.26% | -0.27% | -0.07% | -0.05% | |
| EUR | 0.33% | -0.02% | 0.21% | 0.12% | 0.09% | 0.30% | 0.36% | |
| GBP | 0.38% | 0.02% | 0.18% | 0.14% | 0.11% | 0.33% | 0.38% | |
| JPY | 0.18% | -0.21% | -0.18% | -0.09% | -0.07% | 0.14% | 0.12% | |
| CAD | 0.26% | -0.12% | -0.14% | 0.09% | 0.00% | 0.19% | 0.25% | |
| AUD | 0.27% | -0.09% | -0.11% | 0.07% | -0.00% | 0.22% | 0.27% | |
| NZD | 0.07% | -0.30% | -0.33% | -0.14% | -0.19% | -0.22% | 0.04% | |
| CHF | 0.05% | -0.36% | -0.38% | -0.12% | -0.25% | -0.27% | -0.04% |
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 improving risk mood at the beginning of the week caused the US Dollar (USD) to lose interest. The mixed action seen in major US equity indexes in the American session, however, made it difficult for GBP/USD to stretch higher on Monday.
The UK's FTSE 100 Index trades marginally lower on the day and US stock index futures trade mixed in the European session, pointing to a cautious market stance.
The Conference Board will release the US Consumer Confidence Index data for June later in the day. Investors are likely to react to the survey's findings on labor market conditions. In May, Dana M. Peterson, Chief Economist at the Conference Board said the strong labor market continued to bolster consumers’ overall assessment of the present situation. "Views of current labor market conditions improved in May, as fewer respondents said jobs were hard to get, which outweighed a slight decline in the number who said jobs were plentiful," Peterson added.
If the survey shows that upbeat labor market conditions continue to lift consumer sentiment, the USD could gather strength in the second half of the day. On the other hand, a significant decline in the headline Consumer Confidence Index could hurt the currency.
GBP/USD Technical Analysis
The 200-period Simple Moving Average (SMA) on the 4-hour chart aligns as immediate resistance at 1.2700. In case GBP/USD manages to stabilize above this level, technical buyers could show interest and open the door for another leg higher toward 1.2730 (100-period SMA, Fibonacci 23.6% retracement of the latest uptrend) and 1.2800 (psychological level, static level).
On the downside, supports could be seen at 1.2640, 1.2600 (psychological level, static level) and 1.2580 (Fibonacci 50% retracement) if 1.2700 stays intact as resistance.
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.
