GBP/USD Forecast: Pound Sterling could face strong resistance at 1.2700
- GBP/USD gains traction at the beginning of the week.
- The pair could have a hard time clearing 1.2700-1.2710 resistance.
- The US economic calendar will feature the ISM Manufacturing PMI data for June.
GBP/USD holds its ground early Monday after closing the previous week virtually unchanged. The technical outlook points to a bullish tilt in the short term.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.49% | -0.24% | 0.14% | -0.01% | -0.21% | -0.14% | 0.19% | |
| EUR | 0.49% | 0.02% | 0.33% | 0.18% | 0.16% | 0.04% | 0.37% | |
| GBP | 0.24% | -0.02% | 0.29% | 0.16% | 0.15% | 0.02% | 0.35% | |
| JPY | -0.14% | -0.33% | -0.29% | -0.15% | -0.30% | -0.29% | 0.06% | |
| CAD | 0.00% | -0.18% | -0.16% | 0.15% | -0.16% | -0.13% | 0.19% | |
| AUD | 0.21% | -0.16% | -0.15% | 0.30% | 0.16% | -0.13% | 0.28% | |
| NZD | 0.14% | -0.04% | -0.02% | 0.29% | 0.13% | 0.13% | 0.35% | |
| CHF | -0.19% | -0.37% | -0.35% | -0.06% | -0.19% | -0.28% | -0.35% |
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 selling pressure surrounding the US Dollar (USD) at the beginning of the week helps GBP/USD edge higher. On Friday, the data from the US showed that the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose 2.6% on a yearly basis in May. On a monthly basis, the PCE Price Index remained unchanged. These figures came in line with analysts' estimates and made it difficult for the USD to stay resilient against its rivals.
The US economic docket will feature the ISM Manufacturing PMI data for June later in the day. Investors expect the headline PMI to rise slightly to 49 from 48.7 in May. A reading above 50, which would point to an expansion in the manufacturing sector's business activity, could help the USD find demand.
In case the PMI data comes near the market expectation, investors are likely to pay close attention to inflation and employment components. A sharp decline in the Prices Paid Index could weigh on the USD.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose to 60, reflecting a buildup of bullish momentum. On the upside, 1.2700-1.2710 (100-period Simple Moving Average (SMA) on the 4-hour chart, 200-period SMA) aligns as first resistance before 1.2760 (static level) and 1.2800 (psychological level, static level).
On the downside, the 50-period SMA aligns as interim support at 1.2665 before 1.2640 (100-day SMA) and 1.2600 (psychological level, 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, aka ‘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.
