GBP/USD Forecast: Pound Sterling closes in on key resistance
- GBP/USD trades at its highest level in nearly two weeks above 1.3350.
- The selling pressure surrounding the USD fuels the pair's leg higher.
- The technical outlook points to a bullish tilt in the near term.
GBP/USD gathers bullish momentum in the European session and trades at its highest level in nearly two weeks above 1.3350. The technical outlook suggests that the pair has more room on the upside before turning technically overbought.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.79% | -0.62% | -0.29% | -0.15% | -0.32% | -0.19% | -0.38% | |
| EUR | 0.79% | -0.10% | 0.29% | 0.46% | 0.36% | 0.42% | 0.18% | |
| GBP | 0.62% | 0.10% | 0.12% | 0.56% | 0.47% | 0.52% | 0.28% | |
| JPY | 0.29% | -0.29% | -0.12% | 0.15% | 0.15% | 0.30% | -0.03% | |
| CAD | 0.15% | -0.46% | -0.56% | -0.15% | -0.16% | -0.05% | -0.28% | |
| AUD | 0.32% | -0.36% | -0.47% | -0.15% | 0.16% | 0.05% | -0.17% | |
| NZD | 0.19% | -0.42% | -0.52% | -0.30% | 0.05% | -0.05% | -0.24% | |
| CHF | 0.38% | -0.18% | -0.28% | 0.03% | 0.28% | 0.17% | 0.24% |
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 broad-based US Dollar (USD) weakness fuels GBP/USD's rally at the beginning of the week as markets react to Moody's downgrade of the United States' credit rating late Friday.
Moody's announced that it downgraded the US' credit rating to 'AA1' from 'AAA', citing concerns about the growing $36 trillion debt pile. Moody's explained that the fiscal proposals under considerations were unlikely to lead to a sustained, multi-year reduction in deficits, and added that it forecasts the federal debt burden to rise to about 134% of Gross Domestic Product by 2035, compared with 98% in 2024, per Reuters.
The US economic calendar will not feature any high-impact data releases in the second half of the day. Hence, investors will pay close attention to comments from Federal Reserve (Fed) officials.
The University of Michigan's preliminary Consumer Sentiment Survey for May showed that consumers' one-year inflation expectation jumped to 7.3% from 6.5% in April. In case Fed officials hint that they could refrain from lowering the policy rate multiple times, citing heightened concerns about the inflation outlook, the USD could gather strength against its peers and make it difficult for GBP/USD to extend its rally.
Atlanta Fed President Raphael Bostic said last Friday that he expects the Fed to lower the policy rate once this year. According to the CME FedWatch Tool, markets are currently pricing in about a 70% chance of the Fed cutting the policy rate at least twice this year.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart climbed above 60, pointing to a buildup of bullish momentum. On the upside, 1.3380 (static level) aligns as immediate resistance before 1.3440 (upper limit of the latest uptrend) and 1.3500 (static level, round level).
Looking south, supports could be seen at 1.3300 (100-period Simple Moving Average (SMA), static level), 1.3270 (Fibonacci 23.6% retracement of the latest uptrend) and 1.3220 (200-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, 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.
