GBP/USD Forecast: Pound Sterling buyers regain control ahead of US data
- GBP/USD clings to modest gains above 1.3150 in the European session on Thursday.
- The near-term technical outlook points to a bullish tilt.
- The US economic docket will feature ADP Employment Change for August.
GBP/USD holds its ground and trades in positive territory above 1.3150 after closing higher on Wednesday. Investors await August ADP Employment Change data from the US.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.44% | -0.28% | -1.81% | 0.15% | 0.58% | 0.67% | -0.39% | |
| EUR | 0.44% | 0.18% | -1.39% | 0.57% | 1.03% | 1.10% | 0.03% | |
| GBP | 0.28% | -0.18% | -1.55% | 0.38% | 0.83% | 0.95% | -0.16% | |
| JPY | 1.81% | 1.39% | 1.55% | 1.96% | 2.47% | 2.66% | 1.39% | |
| CAD | -0.15% | -0.57% | -0.38% | -1.96% | 0.48% | 0.52% | -0.54% | |
| AUD | -0.58% | -1.03% | -0.83% | -2.47% | -0.48% | 0.05% | -0.98% | |
| NZD | -0.67% | -1.10% | -0.95% | -2.66% | -0.52% | -0.05% | -1.05% | |
| CHF | 0.39% | -0.03% | 0.16% | -1.39% | 0.54% | 0.98% | 1.05% |
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 renewed US Dollar (USD) weakness helped GBP/USD gain traction during the American trading hours on Wednesday. The US Bureau of Labor Statistics reported that JOLTS Job Openings declined to 7.67 million in July from 7.9 million in June. As this reading missed the market expectation of 8.1 million by a wide margin, the immediate reaction caused the USD to weaken against its rivals.
Nevertheless, the cautious market stance helped the USD to limit its losses and capped GBP/USD's upside toward the end of the day.
ADP Employment Change is expected to come in at 145,000 in August. In case the report shows that there was job-creation at a softer pace than expected, with a reading close to 100,000, the USD could struggle to find demand and allow GBP/USD to continue to stretch higher. On the flip side, an upbeat print above 150,000 could ease fears over worsening conditions in the labor market ahead of Friday's August jobs report, supporting the USD and capping the pair's upside.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60 and GBP/USD closed the last five 4-hour candles above the 20-period Simple Moving Average (SMA), reflecting strengthening buyer interest.
On the upside, 1.3200 (psychological level, static level) aligns as next resistance before 1.3260 (end-point of the latest uptrend). In case the pair drops below 1.3130 (Fibonacci 23.6% retracement of the latest uptrend, 20-period SMA), 1.3100 (psychological level, static level) could be seen as next support before 1.3075 (100-period 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.
