GBP/USD Forecast: Pound Sterling could extend uptrend once it stabilizes above 1.3000
- GBP/USD consolidates Monday's gains near 1.3000 in the European session.
- The bullish stance remains unchanged in the near term.
- Investors could move to the sidelines ahead of key central bank meetings.
After rising more than 0.4% on Monday, GBP/USD continued to edge higher and touched its strongest level since early November above 1.3000 on Tuesday before going into a consolidation phase. The pair's short-term technical outlook shows that the bullish bias remains unchanged.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.52% | -0.40% | 0.60% | -0.62% | -0.66% | -1.27% | -0.56% | |
| EUR | 0.52% | 0.00% | 0.72% | -0.08% | -0.27% | -0.77% | -0.06% | |
| GBP | 0.40% | -0.00% | 1.03% | -0.31% | -0.29% | -0.78% | -0.14% | |
| JPY | -0.60% | -0.72% | -1.03% | -1.20% | -1.46% | -1.81% | -1.29% | |
| CAD | 0.62% | 0.08% | 0.31% | 1.20% | -0.25% | -0.66% | -0.50% | |
| AUD | 0.66% | 0.27% | 0.29% | 1.46% | 0.25% | -0.47% | 0.23% | |
| NZD | 1.27% | 0.77% | 0.78% | 1.81% | 0.66% | 0.47% | 0.70% | |
| CHF | 0.56% | 0.06% | 0.14% | 1.29% | 0.50% | -0.23% | -0.70% |
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 positive shift seen in risk mood following a bullish opening in Wall Street made it difficult for the US Dollar (USD) to find demand and helped GBP/USD post daily gains on Monday. In the meantime, the data published by the US Census Bureau showed that Retail Sales rose by 0.2% on a monthly basis in February, missing the market expectation for an increase of 0.7% by a wide margin.
February Industrial Production data will be featured in the US economic calendar later in the day, alongside Housing Starts and Building Permits figures.
Meanwhile, US stock index futures turned south and were last seen losing between 0.4% and 0.5% after starting the European session in positive territory. In case safe-haven flows start to dominate the action in financial markets in the second half of the day, GBP/USD could have a hard time extending its uptrend.
The Federal Reserve and the Bank of England will announce monetary policy decisions on Wednesday and Thursday, respectively. Investors could move to the sidelines ahead of these key events and limit GBP/USD's volatility in the near term.
GBP/USD Technical Analysis
GBP/USD stays in the upper half of the ascending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, reflecting a bullish bias. On the upside, 1.3000 (static level, round level) aligns as immediate resistance before 1.3040 (static level) and 1.3100 (upper limit of the ascending channel).
Looking south, supports could be spotted at 1.2940 (50-period Simple Moving Average (SMA)), 1.2900 (mid-point of the ascending channel) and 1.2870 (static 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.
