GBP/USD Forecast: Pound Sterling keeps bullish bias ahead of key US data
- GBP/USD climbed to a fresh multi-week high on Thursday.
- Nonfarm Payrolls in the US are forecast to rise by 200K in November.
- The pair could face stiff resistance at 1.2790-1.2800.
After posting small gains on Tuesday and Wednesday, GBP/USD continued to push higher and touched its strongest level since November 12 at 1.2770 on Thursday. The pair retreats slightly in the European morning on Friday but manages to hold at around 1.2750.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.16% | 0.23% | 0.37% | 1.30% | 1.08% | -0.18% | |
| EUR | -0.01% | -0.20% | 0.22% | 0.36% | 1.40% | 1.08% | -0.16% | |
| GBP | 0.16% | 0.20% | 0.40% | 0.56% | 1.60% | 1.29% | 0.02% | |
| JPY | -0.23% | -0.22% | -0.40% | 0.12% | 1.10% | 0.87% | -0.47% | |
| CAD | -0.37% | -0.36% | -0.56% | -0.12% | 1.09% | 0.71% | -0.55% | |
| AUD | -1.30% | -1.40% | -1.60% | -1.10% | -1.09% | -0.31% | -1.56% | |
| NZD | -1.08% | -1.08% | -1.29% | -0.87% | -0.71% | 0.31% | -1.23% | |
| CHF | 0.18% | 0.16% | -0.02% | 0.47% | 0.55% | 1.56% | 1.23% |
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 renewed US Dollar (USD) weakness fuelled the next leg higher in EUR/USD on Thursday. The data from the US showed that the weekly Initial Jobless Claims rose to 224,000 in the week ending November 30 from 215,000 in the previous week. This reading came in above the market expectation of 215,000 and weighed on the USD.
Ahead of the weekend, November labor market data from the US will be watched closely by market participants. In October, Nonfarm Payrolls (NFP) rose by only 12,000, due to the negative impact of hurricanes and strikes on hiring. In November, investors expect a strong rebound, with an increase of 200,000 in NFP.
A weak NFP print of 150,000 or lower could leave the door wide open for a Federal Reserve (Fed) rate cut in December and put additional weight on the USD's shoulders in the American session. The CME FedWatch Tool shows that markets are currently pricing in a 71.8% probability of a 25 basis points (bps) rate reduction in December, suggesting that the USD has more room on the downside.
On the other hand, a reading at or above the market expectation could help the USD hold its ground against its rivals and make it difficult for GBP/USD to extend its uptrend.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart was last seen moving sideways above 60, reflecting the bullish bias. On the upside, the 200-period Simple Moving Average and the Fibonacci 61.8% retracement of the latest downtrend form strong resistance area at 1.2790-1.2800 before 1.2850 (static level) and 1.2900 (Fibonacci 78.6% retracement).
In case GBP/USD falls below 1.2750 (Fibonacci 50% retracement) and starts using this level as resistance, buyers could be discouraged. In this scenario, 1.2700 (Fibonacci 38.2% retracement) could be seen as next support before 1.2650 (100-period SMA).
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.
