GBP/USD Forecast: Pound Sterling could extend slide if 1.3380-1.3370 support fails
- GBP/USD recovers above 1.3450 following a sharp decline in the Asian session.
- Improving sentiment around the US economic outlook could continue to support the USD.
- The pair could come under heavy bearish pressure in case 1.3370-1.3380 support area fails.
After closing the second consecutive day in negative territory on Wednesday, GBP/USD extended its slide in the Asian session on Thursday and touched its lowest level in six days below 1.3420. The pair staged a rebound in the early European session and was last seen trading little changed on the day above 1.3450.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.84% | 0.46% | 1.95% | 0.68% | 0.80% | 0.43% | 1.10% | |
| EUR | -0.84% | -0.37% | 1.13% | -0.16% | -0.04% | -0.40% | 0.27% | |
| GBP | -0.46% | 0.37% | 1.17% | 0.21% | 0.33% | -0.04% | 0.65% | |
| JPY | -1.95% | -1.13% | -1.17% | -1.24% | -1.14% | -1.55% | -0.84% | |
| CAD | -0.68% | 0.16% | -0.21% | 1.24% | 0.14% | -0.25% | 0.44% | |
| AUD | -0.80% | 0.04% | -0.33% | 1.14% | -0.14% | -0.40% | 0.33% | |
| NZD | -0.43% | 0.40% | 0.04% | 1.55% | 0.25% | 0.40% | 0.69% | |
| CHF | -1.10% | -0.27% | -0.65% | 0.84% | -0.44% | -0.33% | -0.69% |
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 improving sentiment around the United States (US) economic outlook boosted the US Dollar and caused GBP/USD to stretch lower.
A federal court in the US announced late Wednesday that they decided to block President Trump's reciprocal tariffs from going into effect, explaining that the president overstepped his authority by imposing across-the-board duties on imports from the US' trading partners, as reported by Reuters.
Reflecting the positive impact of this development on the USD's performance, the USD Index, which tracks the USD's valuation against a basket of six major currencies, climbed to its strongest level in nearly two weeks above 100.50 during the Asian trading hours on Thursday.
The US economic calendar will feature weekly Initial Jobless Claims data. Markets expect the number of first-time applications for unemployment benefits to rise to 230,000 from 227,000 in the previous week. A noticeable decline in this data could support the USD with the immediate reaction.
Additionally, the US Bureau of Economic Analysis will publish the first revision of the annualized Gross Domestic Product (GDP) growth for the first quarter, which came in at -0.3% in the first estimate. In case the GDP data is revised lower, the USD could struggle to preserve its strength and help GBP/USD hold its ground.
GBP/USD Technical Analysis
The Relative Strength Index recovers toward 50, pointing to a loss of bearish momentum. On the upside, 1.3500 (mid-point of the ascending channel, round level) aligns as immediate resistance before 1.3600 (end-point of the uptrend).
Looking south, interim support could be seen at 1.3430 (static level) before 1.3380-1.3370, where the Fibonacci 23.6% retracement level, the 20-day Simple Moving Average (SMA) and the 100-period SMA on the 4-hour chart align. A daily close below this area could attract technical sellers and open the door for another leg lower toward 1.3300 (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.
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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.
