• GBP/USD stays in a consolidation phase slightly above 1.3100 on Wednesday.
  • The technical outlook doesn't yet show a buildup of recovery momentum.
  • The risk-averse market environment could cap the pair's upside.

GBP/USD dropped to its lowest level in over a week below 1.3100 on Tuesday but managed to close the day above this level. The pair trades marginally higher in the European session on Wednesday as investors await the next catalyst.

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 weakest against the Japanese Yen.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.08% 0.02% -0.68% 0.52% 0.86% 0.98% -0.12%
EUR 0.08%   0.12% -0.61% 0.58% 0.95% 1.05% -0.05%
GBP -0.02% -0.12%   -0.74% 0.45% 0.80% 0.95% -0.19%
JPY 0.68% 0.61% 0.74%   1.15% 1.57% 1.78% 0.48%
CAD -0.52% -0.58% -0.45% -1.15%   0.38% 0.45% -0.64%
AUD -0.86% -0.95% -0.80% -1.57% -0.38%   0.09% -0.99%
NZD -0.98% -1.05% -0.95% -1.78% -0.45% -0.09%   -1.09%
CHF 0.12% 0.05% 0.19% -0.48% 0.64% 0.99% 1.09%  

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 US Dollar (USD) showed no immediate reaction to the ISM Manufacturing PMI data on Tuesday, which edged higher to 47.2 in August from 46.8 in July. The risk-averse market atmosphere, as reflected by the sharp decline seen in Wall Street's main indexes, allowed the USD to hold its ground and forced GBP/USD to stretch lower.

In the European session, US stock index futures are down between 0.15% and 0.6% on the day. In case safe-haven flows continue to dominate the action in financial markets in the second half of the day, GBP/USD could have a difficult time extending its rebound.

Investors will also pay close attention to the JOLTS Job Openings data for July on Wednesday. Markets expect the number of job openings to stand at 8.1 million on the last business day of July. A reading at or above 8.5 million could ease concerns over the labor market outlook and help the USD gather strength with the immediate reaction. On the flip side, a lower-than-expected print could hurt the USD and allow GBP/USD to edge higher. 

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator recovered above 40 after falling toward 30 on Tuesday, reflecting sellers' hesitancy.

GBP/USD trades near 1.3130, where the Fibonacci 23.6% retracement of level of the latest uptrend meets the 20-period Simple Moving Average (SMA) on the 4-hour chart. In case the pair flips that level into support, 1.3170 (50-period SMA) could be seen as next resistance before 1.3200 (psychological level, static level).

On the downside, 1.3100 (psychological level, static level) aligns as first support before 1.3060 (100-period SMA) and 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.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content


Recommended Content

Editors’ Picks

GBP/USD churns ahead of UK wages and labor figures

GBP/USD churns ahead of UK wages and labor figures

GBP/USD holds range near 1.3050 early Tuesday, with markets striking a laid-back tone ahead of key UK data due to release in the first half of the trading week. UK wages and jobs additions, with UK Consumer Price Index and Producer Price Index inflation in the barrel for Wednesday. 

GBP/USD News
EUR/USD remains depressed below 1.0900, lowest since August 8 amid stronger USD

EUR/USD remains depressed below 1.0900, lowest since August 8 amid stronger USD

The EUR/USD pair drifts lower for the second straight day on Tuesday and drops to the 1.0890 area in the last hour, back closer to its lowest level since August 8 touched the previous day. Bearish traders, however, need to wait for a break below the 200-day SMA before placing fresh bets ahead of the key central bank event risk.

EUR/USD News
Gold price edges lower amid stronger USD, downside potential seems limited

Gold price edges lower amid stronger USD, downside potential seems limited

Gold price trades with a negative bias for the second straight day on Tuesday and is pressured by a combination of factors. Traders no longer expect another outsized interest rate cut by the Federal Reserve in November, which had been a key factor behind the recent upswing in the US Treasury bond yields. 

Gold News
Bitcoin targets $70,000 as bullish momentum builds

Bitcoin targets $70,000 as bullish momentum builds

Bitcoin is retesting its key resistance level, and a solid close above this threshold could fuel its ongoing rally. Meanwhile, Ethereum has successfully breached its resistance, signaling potential upward momentum, while Ripple approaches its crucial resistance barrier.

Read more
RBA widely expected to keep key interest rate unchanged amid persisting price pressures

RBA widely expected to keep key interest rate unchanged amid persisting price pressures

The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.

Read more
Five best Forex brokers in 2024

Five best Forex brokers in 2024

VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals. 

Read More

Majors

Cryptocurrencies

Signatures