GBP/USD Forecast: Pound Sterling closes in on next resistance
- GBP/USD stabilizes near 1.2350 following Tuesday's choppy action.
- The pair could face stiff resistance at 1.2370.
- Improving risk mood could make it difficult for the USD to find demand.
GBP/USD started the day under pressure on Tuesday but managed to reverse its direction in the second half of the day to close in positive territory. The pair stays relatively quiet and fluctuates at around 1.2350 in the European session on Wednesday.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.53% | -1.46% | -0.37% | -0.96% | -1.39% | -1.46% | -0.80% | |
| EUR | 1.53% | 0.01% | 1.07% | 0.47% | 0.19% | -0.05% | 0.60% | |
| GBP | 1.46% | -0.01% | 1.00% | 0.45% | 0.19% | -0.07% | 0.59% | |
| JPY | 0.37% | -1.07% | -1.00% | -0.59% | -0.99% | -1.20% | -0.62% | |
| CAD | 0.96% | -0.47% | -0.45% | 0.59% | -0.37% | -0.51% | 0.14% | |
| AUD | 1.39% | -0.19% | -0.19% | 0.99% | 0.37% | -0.33% | 0.34% | |
| NZD | 1.46% | 0.05% | 0.07% | 1.20% | 0.51% | 0.33% | 0.47% | |
| CHF | 0.80% | -0.60% | -0.59% | 0.62% | -0.14% | -0.34% | -0.47% |
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).
Despite the uncertainty surrounding US President Donald Trump's tariff policies, Wall Street's main indexes opened higher following the long weekend and made it difficult for the US Dollar to stay resilient against its peers on Tuesday.
Early Wednesday, US stock index futures rise between 0.2% and 0.8%, suggesting that the market mood remains upbeat midweek. If risk flows continue to drive the action in financial markets in the American session, GBP/USD could continue to push higher.
The US economic calendar will not feature any high-tier data releases on Wednesday. On Thursday, the US Department of Labor will release the weekly Initial Jobless Claims data. Ahead of the weekend, preliminary January Services and Manufacturing PMI reports from both the UK and the US will be scrutinized by market participants.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, reflecting the bullish stance. On the upside, 1.2370 (20-day Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest downtrend) aligns as next resistance before 1.2400 (round level, static level) and 1.2450 (Fibonacci 50% retracement).
Looking south, supports could be spotted at 1.2330 (100-period SMA), 1.2300 (round level, static level) and 1.2230 (50-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.
