GBP/USD Forecast: Pound Sterling is yet to pull away from 200-day SMA
- GBP/USD trades in a narrow channel above 1.2500 in the European session.
- The 200-day SMA forms key pivot level at 1.2540.
- The UK's ONS will release employment data on Tuesday.
After fluctuating wildly in the second half of the previous week, GBP/USD seems to have stabilized above 1.2500 at the beginning of the new week. The near-term technical outlook fails to offer directional clues, while the pair struggles to pull away from the 200-day Simple Moving Average (SMA), currently located at 1.2540.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.14% | -0.20% | -1.81% | -0.03% | -0.09% | -0.05% | -0.21% | |
| EUR | -0.14% | -0.25% | -1.83% | -0.10% | -0.02% | -0.11% | -0.25% | |
| GBP | 0.20% | 0.25% | -1.62% | 0.15% | 0.22% | 0.13% | 0.00% | |
| JPY | 1.81% | 1.83% | 1.62% | 1.75% | 1.72% | 1.77% | 1.61% | |
| CAD | 0.03% | 0.10% | -0.15% | -1.75% | -0.17% | -0.00% | -0.11% | |
| AUD | 0.09% | 0.02% | -0.22% | -1.72% | 0.17% | -0.11% | -0.15% | |
| NZD | 0.05% | 0.11% | -0.13% | -1.77% | 0.00% | 0.11% | -0.11% | |
| CHF | 0.21% | 0.25% | -0.00% | -1.61% | 0.11% | 0.15% | 0.11% |
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 dovish tone seen in the Bank of England's (BoE) policy statement following the decision to maintain the bank rate at 5.25% on Thursday made it difficult for Pound Sterling to find demand. The US Dollar (USD) selloff that was triggered by disappointing US data later in the day, however, helped GBP/USD find support and allowed the pair to rise above 1.2500.
BoE Governor Andrew Bailey said that he was optimistic that things were moving in the right direction for a rate cut, adding that they had encouraging news on inflation.
Ahead of the weekend, several Federal Reserve (Fed) officials delivered hawkish remarks and capped GBP/USD upside. Minneapolis Fed President Neel Kashkari repeated his doubts over the restrictiveness of the policy and noted that he can't rule out the possibility of another rate hike this year. Additionally, Fed Board of Governors member Michelle W. Bowman said on Friday that she doesn't see rate cuts as warranted this year, adding that she would want to see a number of months of better inflation data.
The economic calendar will not offer any high-impact data releases on Monday. Fed Vice Chair of the Board of Governors Phillip Jefferson and Cleveland Fed President Loretta Mester are scheduled to speak in the early American session. In case these officials stick to a similarly hawkish language, GBP/USD could stay on the back foot. In the early European morning on Tuesday, the UK's Office for National Statistics will release labor market data.
GBP/USD Technical Analysis
The 200-day Simple Moving Average (SMA) stays intact as near-term resistance at 1.2540. In case GBP/USD rises above that level and confirms it as support, 1.2590-1.2600 (Fibonacci 50% retracement of the latest downtrend, psychological level) could be seen as next resistance before 1.2635 (May 3 high).
On the downside, 1.2500 (psychological level, 100-period SMA on the 4-hour chart) aligns as first support before 1.2450 (Fibonacci 23.6% retracement) and 1.2400 (static level, psychological 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.
