GBP/USD Forecast: Pound Sterling needs to reclaim 1.3100 to discourage bears
- GBP/USD stays under bearish pressure and trades below 1.3100 on Monday.
- The US Dollar preserves its strength following last week's impressive rally.
- The pair could face the next technical support at 1.3050.
GBP/USD registered large losses in the previous week despite holding its ground on Friday. The pair struggles to gain traction at the beginning of the new week and trades below 1.3100.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.83% | 2.31% | 4.29% | 0.62% | 1.74% | 3.19% | 1.98% | |
| EUR | -1.83% | 0.48% | 2.41% | -1.15% | -0.02% | 1.37% | 0.24% | |
| GBP | -2.31% | -0.48% | 2.04% | -1.63% | -0.50% | 0.88% | -0.24% | |
| JPY | -4.29% | -2.41% | -2.04% | -3.45% | -2.50% | -1.02% | -2.14% | |
| CAD | -0.62% | 1.15% | 1.63% | 3.45% | 1.16% | 2.55% | 1.41% | |
| AUD | -1.74% | 0.02% | 0.50% | 2.50% | -1.16% | 1.39% | 0.26% | |
| NZD | -3.19% | -1.37% | -0.88% | 1.02% | -2.55% | -1.39% | -1.14% | |
| CHF | -1.98% | -0.24% | 0.24% | 2.14% | -1.41% | -0.26% | 1.14% |
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).
GBP/USD declined sharply on Thursday, pressured by dovish comments from Bank of England (BoE) Governor Andrew Bailey. Although the pair staged a rebound in the European session on Friday after BoE Chief Economist Huw Pill adopted a more cautious tone regarding further policy easing, it failed to stretch higher as the upbeat US employment data boosted the US Dollar (USD).
Nonfarm Payrolls in the US increased by 254,000 in September, surpassing the market estimate of 140,000 by a wide margin, the US Bureau of Labor Statistics reported on Friday. Furthermore, the Unemployment Rate edged lower to 4.1% from 4.2% in the same period, while the Labor Force Participation stood unchanged at 62.7%.
In the absence of high-impact macroeconomic data releases, the negative shift seen in risk mood, as reflected by falling US stock index futures, helps the USD stay resilient against its peers and doesn't allow the pair to start retracing the previous week's slide.
Investors will pay close attention to comments from Federal Reserve (Fed) policymakers in the second half of the day. Currently, the CME FedWatch Tool shows that markets are nearly fully pricing in a 25 basis points (bps) rate cut at the November policy meeting. Hence, the USD could have a hard time gathering further strength even if Fed officials note that another large rate cut won't be needed.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly below 30 after holding above that level on Friday, suggesting that buyers refrain from committing to an extended technical correction.
On the downside, 1.3050 (static level) aligns as immediate support before 1.3000 (round level, static level) and 1.2940 (static level). In case GBP/USD rises above 1.3100 (Fibonacci 78.6% retracement level of the latest uptrend) and starts using this level as support, 1.3170 (Fibonacci 61.8% retracement) and 1.3200 (200-period Simple Moving Average) could be seen as next resistance levels.
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.
