GBP/USD Forecast: Pound Sterling gains traction on improving risk mood
- GBP/USD trades in positive territory above 1.2450 in the European session on Monday.
- The technical outlook points to a buildup of recovery momentum.
- The pair could continue to push higher in case risk flows continue to dominate the market action.
After touching a fresh multi-month low near 1.2350 on Thursday, GBP/USD staged a technical correction and closed in positive territory on Friday. Early Monday, the pair benefits from improving risk mood and continues to stretch higher toward 1.2500.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.37% | -0.44% | 0.33% | -0.58% | -0.49% | -0.40% | -0.37% | |
| EUR | 0.37% | -0.08% | 0.64% | -0.15% | -0.08% | 0.00% | 0.03% | |
| GBP | 0.44% | 0.08% | 0.73% | -0.08% | 0.00% | 0.08% | 0.10% | |
| JPY | -0.33% | -0.64% | -0.73% | -0.90% | -0.80% | -0.69% | -0.47% | |
| CAD | 0.58% | 0.15% | 0.08% | 0.90% | 0.02% | 0.14% | 0.18% | |
| AUD | 0.49% | 0.08% | 0.00% | 0.80% | -0.02% | 0.09% | 0.09% | |
| NZD | 0.40% | -0.01% | -0.08% | 0.69% | -0.14% | -0.09% | 0.02% | |
| CHF | 0.37% | -0.03% | -0.10% | 0.47% | -0.18% | -0.09% | -0.02% |
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 a bearish start to the year, Wall Street's main indexes gathered bullish momentum and registered strong gains on Friday. Early Monday, US stock index futures trade in the green, making it hard for the US Dollar (USD) to hold its ground.
December Factory Orders will be the only noticeable data featured in the US economic calendar on Monday. Ahead of this week's key employment-related releases, however, investors are unlikely to react to this data. Hence, the risk perception could continue to influence the USD's valuation and drive GBP/USD's action.
On Tuesday, JOLTS Job Openings data for November and the ISM Services PMI report for December from the US will be watched closely by market participants.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rose above 50 and GBP/USD closed the last 4-hour candle above the 20-period Simple Moving Average (SMA), highlighting a buildup of recovery momentum.
On the upside, 1.2500 (static level, round level, 50-period SMA) aligns as immediate resistance before 1.2525 (Fibonacci 38.2% retracement) of the latest downtrend) and 1.2570-1.2575 (100-period SMA; Fibonacci 50% retracement). Looking south, first support could be spotted at 1.2460-1.2450 (Fibonacci 23.6% retracement, 20-period SMA) ahead of 1.2400 (round 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, 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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
