GBP/USD Forecast: Pound Sterling looks to test 1.2800 next
- GBP/USD holds comfortably above 1.2750 in the European morning on Thursday.
- The technical outlook suggests that the pair remains bullish in the near term.
- The pair could face the next stiff resistance at 1.2800.
GBP/USD registered small losses on Wednesday but didn't have a difficult time holding its ground. The pair trades modestly higher on the day above 1.2750 on Thursday and the technical outlook suggests that the bullish bias remains intact in the near term.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.51% | -0.17% | 1.80% | -0.04% | -0.35% | 0.62% | 0.50% | |
| EUR | -0.51% | -0.67% | 1.40% | -0.47% | -0.77% | 0.19% | 0.07% | |
| GBP | 0.17% | 0.67% | 1.91% | 0.20% | -0.11% | 0.87% | 0.74% | |
| JPY | -1.80% | -1.40% | -1.91% | -1.84% | -2.03% | -1.28% | -1.20% | |
| CAD | 0.04% | 0.47% | -0.20% | 1.84% | -0.25% | 0.67% | 0.54% | |
| AUD | 0.35% | 0.77% | 0.11% | 2.03% | 0.25% | 0.98% | 0.85% | |
| NZD | -0.62% | -0.19% | -0.87% | 1.28% | -0.67% | -0.98% | -0.14% | |
| CHF | -0.50% | -0.07% | -0.74% | 1.20% | -0.54% | -0.85% | 0.14% |
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 outperformed its major rivals midweek following the inflation report. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) and the core CPI both increased by 0.3% on a monthly basis, matching market forecasts.
Later in the day, the BLS will publish the Producer Price Index (PPI) data for November and the US Department of Labor will release the weekly Initial Jobless Claims figures. Markets expect the number of first-time applications for unemployment benefits to decline to 220,000 from 224,000. In case this data arrives above 230,000, the USD could come under pressure and help GBP/USD push higher.
Meanwhile, US stock index futures were last seen losing between 0.2% and 0.3%. A bearish opening in Wall Street could cap GBP/USD's upside in the early American session.
Investors will also pay close attention to the European Central Bank's (ECB) policy announcements. A dovish ECB surprise, be it a 50 basis points (bps) rate cut, or a 25 bps cut with a dovish policy statement, could trigger a Euro selloff. In this scenario, Pound Sterling could capture capital outflows out of the Euro and stay resilient against the USD.
GBP/USD Technical Analysis
In case GBP/USD continues to trade above 1.2750-1.2760 area, where the Fibonacci 50% retracement of the latest downtrend and the 200-period Simple Moving Average (SMA) are located, it could meet the next resistance at 1.2800 (Fibonacci 61.8% retracement) before targeting 1.2850 (static level).
On the downside, immediate support aligns at 1.2730 (50-period SMA) ahead of 1.2700 (Fibonacci 38.2% retracement) and 1.2670 (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.
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.
