- GBP/USD moves sideways slightly below 1.3200 in the European session on Friday.
- July PCE inflation data will be featured in the US economic docket.
- The pair's near-term technical outlook highlights a lack of directional momentum.
After posting small daily losses on Thursday, GBP/USD holds its ground early Friday but continues to trade below 1.3200. Key inflation data from the US could trigger the next directional move in the pair.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.96% | 0.23% | 0.61% | -0.26% | -0.18% | -0.65% | 0.09% | |
| EUR | -0.96% | -0.79% | -0.35% | -1.20% | -1.22% | -1.58% | -0.84% | |
| GBP | -0.23% | 0.79% | 0.33% | -0.49% | -0.44% | -0.87% | -0.16% | |
| JPY | -0.61% | 0.35% | -0.33% | -0.85% | -0.70% | -1.03% | -0.46% | |
| CAD | 0.26% | 1.20% | 0.49% | 0.85% | 0.08% | -0.34% | 0.32% | |
| AUD | 0.18% | 1.22% | 0.44% | 0.70% | -0.08% | -0.37% | 0.34% | |
| NZD | 0.65% | 1.58% | 0.87% | 1.03% | 0.34% | 0.37% | 0.71% | |
| CHF | -0.09% | 0.84% | 0.16% | 0.46% | -0.32% | -0.34% | -0.71% |
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 (USD) preserved its strength on the back of robust macroeconomic data releases, causing GBP/USD to close the second consecutive day in the red.
The US Bureau of Economic Analysis (BEA) revised the annualized Gross Domestic Product (GDP) growth for the second quarter higher to 3% from 2.8% in the previous estimate. Furthermore, the US Department of Labor announced that there were 231,000 first-time applications for unemployment benefits in the week ending August 24, down slightly from 233,000 in the previous week.
In the early American session, the BEA will release the Personal Consumption Expenditures (PCE) Price Index data for July, the Federal Reserve's (Fed) preferred gauge of inflation. The core PCE Price Index, which excludes volatile food and energy prices, is expected to increase 0.2% on a monthly basis.
A stronger-than-forecast increase in the monthly core PCE Price Index could cause investors to refrain from pricing in a 50 basis points Fed rate cut in September and help the USD find demand, causing GBP/USD to edge lower. On the other hand, a reading of 0.1% or lower could have the opposite impact on the USD's valuation.
According to the CME FedWatch Tool, markets are currently seeing a 33% chance of a 50 basis points Fed rate cut in September.
GBP/USD Technical Analysis
GBP/USD fluctuates between the 20-period and the 50-period Simple Moving Averages (SMA) on Friday. Additionally, the Relative Strength Index continues to move sideways at around 50, reflecting the pair's indecisiveness.
On the downside, immediate support aligns at 1.3150 (50-period SMA) before 1.3130 (Fibonacci 23.6% retracement of the latest uptrend) and 1.3100 (psychological level, static level). First resistance is located at 1.3200 (20-period SMA, static level) ahead of 1.3260 (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.
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