GBP/USD Forecast: Pound Sterling could face strong resistance at 1.2270
- GBP/USD gains traction to start the week following Friday's sharp decline.
- The US Dollar stays under pressure on Trump Inauguration Day.
- The technical outlook is yet to highlight a buildup of bullish momentum.
After losing more than 0.5% on Friday, GBP/USD gains traction at the beginning of the week and trades in positive territory above 1.2200. In the absence of high-impact data releases, comments from Donald Trump at his inauguration ceremony will be watched closely by market participants.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.37% | -0.26% | -0.11% | -0.11% | -0.39% | -0.39% | -0.03% | |
| EUR | 0.37% | 0.06% | 0.16% | 0.16% | 0.04% | -0.13% | 0.22% | |
| GBP | 0.26% | -0.06% | 0.04% | 0.09% | -0.00% | -0.20% | 0.16% | |
| JPY | 0.11% | -0.16% | -0.04% | 0.01% | -0.23% | -0.38% | -0.09% | |
| CAD | 0.11% | -0.16% | -0.09% | -0.01% | -0.22% | -0.29% | 0.07% | |
| AUD | 0.39% | -0.04% | 0.00% | 0.23% | 0.22% | -0.27% | 0.11% | |
| NZD | 0.39% | 0.13% | 0.20% | 0.38% | 0.29% | 0.27% | 0.17% | |
| CHF | 0.03% | -0.22% | -0.16% | 0.09% | -0.07% | -0.11% | -0.17% |
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 remains under bearish pressure in the European session, helping GBP/USD stretch higher.
Investors remain optimistic about Trump refraining from introducing an aggressive trade policy later in the day. In a social media post over the weekend, Trump noted he had a call with Chairman Xi Jinping of China. "It is my expectation that we will solve many problems together, and starting immediately," Trump said.
It's worth mentioning that stock and bond markets in the US will be closed in observance of the Martin Luther King Jr. Day holiday on Monday. Hence, there could be a delayed market reaction to Trump's comments.
Early Tuesday, the UK's Office for National Statistics will publish the jobs report, which will feature ILO Unemployment Rate, Employment Change and wage inflation figures for November.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 50 and GBP/USD struggles to stabilize above the 20-period Simple Moving Average (SMA), highlighting buyers' hesitancy.
On the upside, 1.2225 (50-period SMA) aligns as immediate resistance before 1.2270 (Fibonacci 23.6% retracement of the latest downtrend) and 1.2300 (static level, round level). Looking south, first support could be spotted at 1.2160 (static level) before 1.2100 (end-point of the downtrend).
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.
