GBP/USD Forecast: Pound Sterling clings to bullish stance
- GBP/USD extends its weekly uptrend, trades near 1.3500 on Thursday.
- The technical outlook points to a buildup in bullish momentum.
- Some macroeconomic data releases from the US will be postponed because of the shutdown.
GBP/USD preserves its bullish momentum in the European session and trades near 1.3500 following four consecutive days of gains. The pair's near-term technical outlook suggests that the bullish bias remains intact, while markets remain focused on political developments in the US.
Pound Sterling 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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.45% | -0.79% | -1.86% | 0.00% | -1.03% | -0.83% | -0.28% | |
| EUR | 0.45% | -0.34% | -1.57% | 0.45% | -0.58% | -0.40% | 0.15% | |
| GBP | 0.79% | 0.34% | -1.15% | 0.80% | -0.30% | -0.05% | 0.50% | |
| JPY | 1.86% | 1.57% | 1.15% | 1.93% | 0.89% | 0.93% | 1.66% | |
| CAD | -0.01% | -0.45% | -0.80% | -1.93% | -0.99% | -0.85% | -0.30% | |
| AUD | 1.03% | 0.58% | 0.30% | -0.89% | 0.99% | 0.19% | 0.73% | |
| NZD | 0.83% | 0.40% | 0.05% | -0.93% | 0.85% | -0.19% | 0.70% | |
| CHF | 0.28% | -0.15% | -0.50% | -1.66% | 0.30% | -0.73% | -0.70% |
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 selling pressure surrounding the US Dollar (USD) persisted midweek as markets reacted to the uncertainty created by the shutdown of the federal government. Following a second round of voting on Wednesday, lawmakers failed to come to terms on restoring the government funding.
Meanwhile, mixed macroeconomic data releases from the US didn't allow the USD to hold its ground.
The Automatic Data Processing's (ADP) monthly publication showed that private sector payrolls fell by 32,000 in September. Moreover, the August increase of 54,000 got revised down to -3,000. Later in the day, the Institute for Supply Management (ISM) reported that the Manufacturing Purchasing Managers' Index (PMI) rose to 49.1 in September from 48.7 in August. Other details of the survey showed that the Prices Paid Index, the inflation component of the PMI survey, edged lower to 61.9 from 63.7, while the Employment Index recovered to 45.3 from 43.8, reflecting an ongoing contraction in the manufacturing sector's payrolls, albeit at a softer pace.
The weekly Initial Jobless Claims and August Factory Orders data will not be published on Thursday. Although it's not confirmed yet, Friday's highly-anticipated employment report, which will feature Nonfarm Payrolls and Unemployment Rate figures, will likely be postponed as well.
The lack of data releases will cause investors to remain focused on political developments in the near term. Unless Republicans and Democrats find a middle ground to end the shutdown, investors could refrain from betting on a steady recovery in the USD.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, suggesting that the bullish bias remains intact.
The 100-day Simple Moving Average (SMA) aligns as a pivot level at 1.3500. The 100-period and the 200-period SMAs on the 4-hour chart reinforce this level as well. In case GBP/USD stabilizes above 1.3500 and starts using it as support, 1.3550 (Fibonacci 23.6% retracement of the latest uptrend) could be seen as the next resistance level before 1.3600 (static level, round level).
On the downside, support levels could be seen at 1.3480-1.3470 (Fibonacci 38.2% retracement, 50-day SMA) and 1.3410-1.3400 (Fibonacci 50% retracement, round level).
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
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.
