GBP/USD Forecast: Pound Sterling could meet next resistance at 1.2530
- GBP/USD trades at a fresh weekly high near 1.2500 on Thursday.
- Pound Sterling benefits from the upbeat Gross Domestic Product (GDP) data.
- The pair could encounter the next technical hurdle at 1.2530.
GBP/USD trades at a fresh weekly high at around 1.2500 in the European session on Thursday, supported by upbeat macroeconomic data releases from the UK and the broad-based selling pressure surrounding the US Dollar (USD).
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 | -0.98% | -0.81% | 1.85% | -0.14% | -0.17% | 0.18% | 0.11% | |
| EUR | 0.98% | 0.23% | 2.99% | 0.97% | 0.81% | 1.26% | 1.17% | |
| GBP | 0.81% | -0.23% | 2.58% | 0.70% | 0.57% | 1.02% | 0.94% | |
| JPY | -1.85% | -2.99% | -2.58% | -1.98% | -1.92% | -1.64% | -1.69% | |
| CAD | 0.14% | -0.97% | -0.70% | 1.98% | 0.00% | 0.29% | 0.17% | |
| AUD | 0.17% | -0.81% | -0.57% | 1.92% | 0.00% | 0.45% | 0.36% | |
| NZD | -0.18% | -1.26% | -1.02% | 1.64% | -0.29% | -0.45% | -0.09% | |
| CHF | -0.11% | -1.17% | -0.94% | 1.69% | -0.17% | -0.36% | 0.09% |
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 UK's Office for National Statistics (ONS) reported early Thursday that the UK's Gross Domestic Product (GDP) expanded at an annual rate of 1.4% in the fourth quarter. This reading followed the 1% growth recorded in the previous quarter and surpassed the market expectation of 1.1%. Other data from the UK showed that Industrial production and Manufacturing Production increased by 0.5% and 0.7%, respectively, on a monthly basis in December.
On Wednesday, the positive shift seen in risk mood made it difficult for the USD to outperform its rivals, despite the stronger-than-forecast January inflation data. The Consumer Price Index (CPI) rose by 3% on a yearly basis, coming in above the market expectation and December's increase of 2.9%. Additionally, the core CPI, which excludes volatile food and energy prices, rose by 0.4% on a monthly basis, following the 0.2% rise recorded in the previous month.
Growing optimism about a Russia-Ukraine truce and a lack of fresh headlines surrounding US President Donald Trump's trade policy allowed risk flows to return to markets. In a social media post, Trump said that he had a "lengthy and highly productive" phone call with Russian President Vladimir Putin to begin negotiations to end the war in Ukraine, while refraining from announcing reciprocal tariffs.
According to CNBC, however, Trump could still unveil his reciprocal tariff plan before he meets with Indian Prime Minister Narendra Modi on Thursday. If that were to come to fruition, markets could adopt a cautious stance and make it difficult for GBP/USD to build on its daily gains.
GBP/USD Technical Analysis
The Relative Strength Index continues to push higher but remains below 70, suggesting that there is more room on the upside for GBP/USD before it turns technically overbought.
Looking north, the first resistance level could be spotted at 1.2530 (Fibonacci 61.8% retracement of the latest downtrend) before 1.2600 (round level, static level) and 1.2650 (Fibonacci 78.6% retracement).
On the downside, 1.2450 (Fibonacci 50% retracement) aligns as first support before 1.2420 (100-period Simple Moving Average (SMA)) and 1.2380-1.2370 (200-period SMA, Fibonacci 38.2% 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.
