GBP/USD Forecast: Pound Sterling could face stiff resistance at 1.3830
- GBP/USD trades at its highest level since October 2021 above 1.3770.
- Comments from central bankers will be watched closely by market participants.
- The pair could encounter strong resistance at 1.3830.
GBP/USD gathers bullish momentum following Monday's choppy action and trades at its highest level since October 2021 above 1.3770. In the second half of the day, macroeconomic data releases from the US and comments from central bankers could drive the pair's action.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.76% | -0.49% | -1.03% | -0.71% | -0.74% | -1.03% | -1.35% | |
| EUR | 0.76% | 0.24% | -0.24% | 0.04% | 0.00% | -0.26% | -0.60% | |
| GBP | 0.49% | -0.24% | -0.69% | -0.21% | -0.24% | -0.52% | -0.85% | |
| JPY | 1.03% | 0.24% | 0.69% | 0.31% | 0.33% | 0.04% | -0.28% | |
| CAD | 0.71% | -0.04% | 0.21% | -0.31% | -0.08% | -0.32% | -0.64% | |
| AUD | 0.74% | -0.00% | 0.24% | -0.33% | 0.08% | -0.28% | -0.61% | |
| NZD | 1.03% | 0.26% | 0.52% | -0.04% | 0.32% | 0.28% | -0.32% | |
| CHF | 1.35% | 0.60% | 0.85% | 0.28% | 0.64% | 0.61% | 0.32% |
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).
Following the previous week's sharp decline, the US Dollar (USD) Index stays under bearish pressure early Tuesday, fuelling GBP/USD's rally.
The risk-positive market atmosphere and increasing political pressure on the Federal Reserve (Fed) continue to weigh on the USD. White House press secretary Karoline Leavitt said late Monday that US President Donald Trump sent a handwritten note to Fed Chairman Jerome Powell, asking him to lower interest rates. She further noted that Trump believes interest rates should be lowered to about 1%.
Meanwhile, Bank of England (BoE) Governor Andrew Bailey reiterated on Tuesday that the path of interest rates will continue to be gradually downwards.
"The increase in uncertainty is coming through in terms of economic activity and growth," Bailey added. "Businesses tell me they are putting off investment decisions." Nevertheless, these comments failed to influence Pound Sterling's valuation.
Later in the day, JOLTS Job Openings data for May and the ISM Manufacturing PMI data for June will be featured in the US economic calendar. The market reaction to these releases is likely to be straightforward and remain short-lived. In case both of these data offer positive surprises, the USD could stage a rebound and trigger a downward correction in GBP/USD.
Moreover, BoE Governor Bailey and Fed Chairman Powell will participate in a policy panel at the ECB Forum on Central Banking in Sintra, Portugal. In case Powell suggests that they are unlikely to consider a rate cut until September and continue to assess the impact of tariffs on inflation, the USD could stay resilient against its peers.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 70, suggesting that GBP/USD is about to turn technically overbought. On the upside, 1.3830 (upper limit of the ascending channel) aligns as an important resistance level before 1.3900 (static level, round level).
Looking south, the first support could be spotted at 1.3730 (20-period Simple Moving Average) ahead of 1.3700 (static level, round level) and 1.3670 (mid-point of the ascending channel).
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.
