GBP/USD Forecast: Pound Sterling could face next resistance at 1.2750
- GBP/USD holds above 1.2700 in the European session on Thursday.
- The pair could stretch higher if it clears 1.2750 resistance.
- GBP/USD's upside could remain capped in case markets turn cautious.
GBP/USD registered small gains for the second consecutive day on Wednesday and continued to edge higher early Thursday. The technical outlook suggests that the bullish bias remains intact in the near term.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.46% | 0.13% | 0.41% | 0.51% | 1.14% | 1.02% | 0.46% | |
| EUR | -0.46% | -0.38% | -0.05% | 0.06% | 0.77% | 0.55% | 0.05% | |
| GBP | -0.13% | 0.38% | 0.31% | 0.43% | 1.15% | 0.92% | 0.37% | |
| JPY | -0.41% | 0.05% | -0.31% | 0.12% | 0.77% | 0.62% | -0.00% | |
| CAD | -0.51% | -0.06% | -0.43% | -0.12% | 0.79% | 0.49% | -0.06% | |
| AUD | -1.14% | -0.77% | -1.15% | -0.77% | -0.79% | -0.23% | -0.77% | |
| NZD | -1.02% | -0.55% | -0.92% | -0.62% | -0.49% | 0.23% | -0.52% | |
| CHF | -0.46% | -0.05% | -0.37% | 0.00% | 0.06% | 0.77% | 0.52% |
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).
Falling US Treasury bond yields and disappointing macroeconomic data releases from the US made it difficult for the US Dollar (USD) to stay resilient against its major rivals on Wednesday. The ISM Services PMI declined to 52.1 in November from 56 in October and missed the market expectation of 55.5. Additionally, the ADP Employment Change came in at 146,000 in November, compared to analysts' estimate of 150,000.
In the meantime, EUR/GBP closed in negative territory for the sixth consecutive day on Wednesday, suggesting that Pound Sterling continued to capture capital outflows out of the Euro.
In the early American session on Thursday, the US Department of Labor will release the weekly Initial Jobless Claims. Ahead of Friday's Nonfarm Payrolls (NFP) data, however, the market reaction to this data is likely to remain short-lived. Instead, investors could react to changes in risk perception. At the time of press, US stock index futures were trading mixed. In case safe-haven flows dominate the action in financial markets later in the day, GBP/USD could struggle to push higher.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds comfortably above 50 and GBP/USD trades above the ascending trend line, reflecting the bullish bias.
On the upside, 1.2750 (Fibonacci 50% retracement of the latest downtrend) could be seen as next resistance before 1.2790-1.2800 (Fibonacci 61.8% retracement, 200-period SMA) and 1.2850 (static level). On the downside, immediate support is located at 1.2700 (Fibonacci 38.2% retracement) ahead of 1.2650 (100-period Simple Moving Average) and 1.2620 (Fibonacci 23.6% 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, 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.
