GBP/USD Forecast: Pound Sterling could extend rebound once 1.3130 is confirmed as support
- GBP/USD clings to modest daily gains above 1.3100 on Friday.
- 1.3130 aligns a key pivot level for the pair.
- The US economic calendar will not offer high-impact data releases.
After touching its lowest level since August 20 near 1.3000 on Wednesday, GBP/USD staged a decisive rebound on Thursday. The pair clings to modest daily gains and holds comfortably above 1.3100 in the European session on Friday.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | -0.10% | -1.17% | 0.06% | -0.74% | -0.20% | 0.44% | |
| EUR | 0.04% | -0.10% | -1.06% | 0.11% | -0.74% | -0.14% | 0.47% | |
| GBP | 0.10% | 0.10% | -1.09% | 0.21% | -0.64% | -0.05% | 0.57% | |
| JPY | 1.17% | 1.06% | 1.09% | 1.23% | 0.44% | 0.96% | 1.81% | |
| CAD | -0.06% | -0.11% | -0.21% | -1.23% | -0.76% | -0.27% | 0.54% | |
| AUD | 0.74% | 0.74% | 0.64% | -0.44% | 0.76% | 0.59% | 1.20% | |
| NZD | 0.20% | 0.14% | 0.05% | -0.96% | 0.27% | -0.59% | 0.63% | |
| CHF | -0.44% | -0.47% | -0.57% | -1.81% | -0.54% | -1.20% | -0.63% |
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 selling pressure surrounding the US Dollar (USD) and the improving risk mood helped GBP/USD gather bullish momentum in the second half of the day on Thursday.
Softer-than-forecast producer inflation data made it difficult for the USD to stay resilient against its major rivals. The US bureau of Labor Statistics (BLS) reported that the Producer Price Index rose 1.7% in August, down from 2.1% in July and below analysts' estimate of 1.8%.
According to the CME FedWatch Tool, markets are currently pricing in a stronger-than-40% probability of a 50 basis points Federal Reserve (Fed) rate cut at next week's policy meeting, up from about 20% earlier in the week.
Import Price Index and Export Price Index data for July will be featured in the US economic docket. Later in the session, the University of Michigan will release the preliminary Consumer Sentiment Survey for September. These data are unlikely to trigger a noticeable reaction. Meanwhile, US stock index futures trade marginally higher on the day. In case risk flows continue to dominate the action in the American session, GBP/USD could inch higher heading into the weekend.
GBP/USD Technical Analysis
GBP/USD was last seen trading slightly above 1.3130, where the 100-period and the 200-period Simple Moving Averages (SMA) meet the Fibonacci 23.6% retracement of the latest uptrend. In case the pair continues to use this level as support, technical buyers could remain interested. In this scenario, 1.3200 (static level) could be seen as next resistance before 1.3260 (end-point of the uptrend).
If GBP/USD retreats below 1.3130 and fails to reclaim this level, 1.3110-1.3100 (50-period SMA, static level) could act as next support ahead of 1.3040 (Fibonacci 38.2% retracement).
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.
