GBP/USD Forecast: Pound Sterling holds above key technical level
- GBP/USD enters a consolidation phase after closing in positive territory on Thursday.
- Technical buyers could remain interested while the pair holds above 1.2970.
- The US economic calendar will feature Durable Goods Orders data for September.
Following Wednesday's sharp decline, GBP/USD reversed its direction and gained more than 0.4% on Thursday. The pair fluctuates in a tight channel below 1.3000 in the European morning on Friday.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.55% | 1.63% | 0.26% | 1.16% | 1.13% | 0.30% | |
| EUR | -0.39% | 0.08% | 1.13% | -0.07% | 0.74% | 0.62% | -0.17% | |
| GBP | -0.55% | -0.08% | 1.05% | -0.28% | 0.63% | 0.58% | -0.29% | |
| JPY | -1.63% | -1.13% | -1.05% | -1.35% | -0.45% | -0.43% | -1.36% | |
| CAD | -0.26% | 0.07% | 0.28% | 1.35% | 0.81% | 0.92% | -0.09% | |
| AUD | -1.16% | -0.74% | -0.63% | 0.45% | -0.81% | 0.04% | -0.92% | |
| NZD | -1.13% | -0.62% | -0.58% | 0.43% | -0.92% | -0.04% | -0.86% | |
| CHF | -0.30% | 0.17% | 0.29% | 1.36% | 0.09% | 0.92% | 0.86% |
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).
After outperforming its rivals in the first half of the week, the US Dollar (USD) lost its strength on Thursday, with the US Dollar Index losing 0.4%. The positive shift seen in risk sentiment made it difficult for the USD to find demand, while retreating US Treasury bond yield further weighed on the currency.
Durable Goods Orders for September and the University of Michigan's (UoM) Consumer Sentiment Index for October will be featured in the US economic calendar on Friday. The UoM data is unlikely to trigger a reaction because it will be a revision. If the Durable Goods Orders unexpectedly rise, the initial reaction could support the USD. On the other hand, a reading worse than the market expectation of -1% could hurt the currency and allow GBP/USD to stretch higher heading into the weekend.
In the meantime, US stock index futures were last seen rising between 0.1% and 0.2%. A bullish opening in Wall Street could attract risk-on flows and cause the USD to weaken further in the second half of the day.
GBP/USD Technical Analysis
GBP/USD trades within the upper half of the descending regression channel but holds above the 100-day Simple Moving Average (SMA), currently located at 1.2970. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 50, reflecting sellers' hesitancy.
In case GBP/USD continues to use 1.2970 as support, buyers could remain interested. In this scenario, immediate resistance is located at 1.3000-1.3010 (static level, upper limit of the descending channel) before 1.3050 (100-period SMA) and 1.3100 (static level).
On the downside, supports could be seen at 1.2900 (mid-point of the descending channel) and 1.2800 (lower limit of the descending 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.
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.
