GBP/USD Forecast: Pound Sterling continues to lose bullish momentum
- GBP/USD stays relatively quiet at around 1.3550 early Monday.
- The technical outlook points to a loss of bullish momentum.
- Headlines coming out of the Trump-Zelenskyy meeting could impact the market mood.
After rising more than 0.7% in the previous week, GBP/USD struggles to gain traction on Monday and fluctuates in a tight channel at around 1.3550. Investors will pay close attention to headlines coming out of the meeting between United States (US) President Donald Trump and Ukrainian President Volodymyr Zelenskyy later in the day.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.72% | -0.12% | 0.30% | 0.12% | 0.31% | -0.19% | |
| EUR | 0.31% | -0.42% | 0.19% | 0.62% | 0.43% | 0.58% | 0.12% | |
| GBP | 0.72% | 0.42% | 0.58% | 1.04% | 0.85% | 1.00% | 0.55% | |
| JPY | 0.12% | -0.19% | -0.58% | 0.46% | 0.28% | 0.51% | 0.08% | |
| CAD | -0.30% | -0.62% | -1.04% | -0.46% | -0.18% | -0.03% | -0.51% | |
| AUD | -0.12% | -0.43% | -0.85% | -0.28% | 0.18% | 0.15% | -0.30% | |
| NZD | -0.31% | -0.58% | -1.00% | -0.51% | 0.03% | -0.15% | -0.45% | |
| CHF | 0.19% | -0.12% | -0.55% | -0.08% | 0.51% | 0.30% | 0.45% |
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).
Pound Sterling outperformed its major rivals last week, supported by upbeat macroeconomic data releases. Meanwhile, the US Dollar (USD) failed to find direction as investors assessed cautious comments from Federal Reserve (Fed) officials on policy easing and strong producer inflation data against signs of cooling conditions in the labor market.
The economic calendar will not offer any high-tier data releases on Monday. Hence, market participants could react to changes in risk perception.
Following his meeting with Russian President Vladimir Putin on Friday, US President Trump signalled that Ukraine will need to give up on Crimea and NATO membership if they want to end the war.
"President Zelenskyy of Ukraine can end the war with Russia almost immediately, if he wants to, or he can continue to fight," Trump said on his Truth Social platform. "No getting back Obama given Crimea...and NO GOING INTO NATO BY UKRAINE. Some things never change!!!"
In case markets turn optimistic about a Russia-Ukraine peace deal following the Trump-Zelenskyy summit, risk flows could dominate the action in financial markets and cause the US Dollar (USD) to weaken. On the other hand, GBP/USD could stay on the back foot if Russia and Ukraine don't move closer to an agreement.
Later in the week, the UK's Office for National Statistics (ONS) will publish Consumer Price Index (CPI) data for July, which could influence the Bank of England's (BoE) policy outlook.
GBP/USD Technical Analysis
GBP/USD closed the last 4-hour candle below the 20-period Simple Moving Average and retreated slightly below the lower limit of the ascending regression channel coming from early August. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart retreated below 60, reflecting a loss of bullish momentum.
On the downside, 1.3540 (Fibonacci 61.8% retracement of the latest downtrend) aligns as the immediate support level before 1.3500 (static level, round level) and 1.3460 (Fibonacci 50% retracement, 200-period SMA).
Looking north, resistance levels could be spotted at 1.3590-1.3600 (static level, round level), 1.3640 (Fibonacci 78.6% retracement) and 1.3700 (static level, 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.
