GBP/USD Forecast: Pound Sterling needs to stabilize above 1.2815 to extend rebound
- GBP/USD trades in positive territory above 1.2800 in the European session.
- The economic calendar will not feature any high-impact data releases on Wednesday.
- The near-term technical outlook is yet to point to a bullish tilt.
GBP/USD holds its ground and trades in positive territory above 1.2800 after posting modest gains on Tuesday. The pair's near-term technical outlook, however, doesn't yet highlight a buildup of bullish momentum.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.64% | 0.50% | -0.20% | -0.40% | 0.41% | 0.45% | -1.61% | |
| EUR | 0.64% | 1.43% | 1.04% | 0.87% | 1.00% | 1.73% | -0.37% | |
| GBP | -0.50% | -1.43% | -1.66% | -0.56% | -0.43% | 0.29% | -1.78% | |
| JPY | 0.20% | -1.04% | 1.66% | -0.15% | 1.60% | 1.93% | -1.05% | |
| CAD | 0.40% | -0.87% | 0.56% | 0.15% | 0.46% | 0.84% | -1.49% | |
| AUD | -0.41% | -1.00% | 0.43% | -1.60% | -0.46% | 0.72% | -1.34% | |
| NZD | -0.45% | -1.73% | -0.29% | -1.93% | -0.84% | -0.72% | -2.06% | |
| CHF | 1.61% | 0.37% | 1.78% | 1.05% | 1.49% | 1.34% | 2.06% |
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 strong selling pressure surrounding the US Dollar (USD) helped GBP/USD find support on Tuesday. Growing expectations for a downturn in the US economy on US President Donald Trump's aggressive policy continue to weigh on the USD.
Senior officials from China’s State Council, alongside several government and regulatory bodies, will reportedly hold a meeting to discuss how to respond to Trump’s tariffs on Wednesday. In case China retaliates and leaves the door open to a further escalation in the conflict, the USD could continue to weaken.
Meanwhile, market participants see the UK economy taking a hit from the trade war and now expect the Bank of England (BoE) to adopt a dovish stance in the second half of the year. "Interest rate futures pointed to about 95 basis points of reductions to the BoE's benchmark Bank Rate by December, compared with around 78 bps on Tuesday as financial markets braced for a hit to economic growth," Reuters reported.
In the absence of high-impact data releases, the risk-averse market atmosphere, combined with dovish BoE expectations, could limit GBP/USD's upside in the near term.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 despite the latest rebound, suggesting that buyers remain reluctant to commit to a steady recovery in Pound Sterling.
The 200-day Simple Moving Average (SMA) aligns as a key pivot level at 1.2815. In case GBP/USD confirms this level as support, sellers could move to the sidelines. In this scenario, 1.2880 (static level) and 1.2920 (20-day SMA) could be seen as next resistance levels. On the downside, supports align at 1.2750 (50-day SMA) and 1.2640 (100-day SMA) if the 200-day SMA is confirmed as resistance.
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.
