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GBP/USD Forecast: Pound Sterling buyers move to sidelines, eyes on US data

  • GBP/USD trades below 1.3350 in the European session on Tuesday.
  • The near-term technical outlook points to a bearish tilt.
  • US economic calendar will feature ISM Manufacturing PMI and JOLTS Job Openings data.

GBP/USD stays under bearish pressure early Tuesday and trades in negative territory below 1.3350 after failing so stabilize above 1.3400 on Monday. The pair's technical outlook points to a bearish tilt in the near term.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.26%0.32%0.13%0.08%0.03%0.42%0.09%
EUR-0.26% 0.05%-0.14%-0.18%-0.23%0.15%-0.18%
GBP-0.32%-0.05% -0.19%-0.24%-0.28%0.11%-0.22%
JPY-0.13%0.14%0.19% -0.03%-0.09%0.30%-0.02%
CAD-0.08%0.18%0.24%0.03% -0.05%0.32%0.01%
AUD-0.03%0.23%0.28%0.09%0.05% 0.39%0.05%
NZD-0.42%-0.15%-0.11%-0.30%-0.32%-0.39% -0.32%
CHF-0.09%0.18%0.22%0.02%-0.01%-0.05%0.32% 

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).

GBP/USD rose above 1.3400 during the European trading hours on Monday but failed to gather bullish momentum. With markets adopting a cautious stance on the last trading of the third quarter, the US Dollar (USD) managed to hold its ground and caused the pair to erase its daily gains.

Early Tuesday, GBP/USD continues to stretch lower as the USD extends its recovery. In the second half of the day, JOLTS Job Openings data for August and the ISM Manufacturing PMI report for September will be featured in the US economic calendar. 

While speaking at the National Association for Business Economics Annual Meeting in Nashville on Monday, Fed Chairman Jerome Powell said that the labor market may give a better real time picture of the state of the economy than the Gross Domestic Product. Hence, a significant drop in the number of job openings, with a reading at or below 7 million, could hurt the USD and allow GBP/USD to regain its traction. On the other hand, a print above 8 million could have the opposite impact on the pair's action.

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the ascending regression channel coming from September 11 and the Relative Strength Index (RSI) indicator on the 4-hour chart declined toward 40, reflecting a bearish shift in the short-term outlook.

On the downside, 1.3300 (round level) aligns as interim support before 1.3275 (Fibonacci 38.2% retracement of the latest uptrend) and 1.3240-1.3230 (100-period Simple Moving Average (SMA), Fibonacci 50% retracement). In case GBP/USD returns within the ascending channel by reclaiming 1.3350 (lower limit of the ascending channel, 50-period SMA), 1.3400 (round level) and 1.3440 (mid-point of the ascending channel) could be seen as next resistance levels.

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.

Author

Eren Sengezer

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.

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