- GBP/USD recovered above 1.2550 after suffering large losses on Wednesday.
- The near-term technical outlook suggests that the bearish bias stays intact.
- The pair could face strong resistance at 1.2590.
GBP/USD came under heavy bearish pressure and touched its lowest level in two months at 1.2520 during the American trading hours on Wednesday. The pair stays in positive territory above 1.2550 early Thursday but the technical outlook doesn't yet point to a build up of recovery momentum.
The US Dollar (USD) outperformed its rivals in the second half of the day as investors reacted to the US inflation data for March, triggering a sharp decline in GBP/USD.
Pound Sterling price this week
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies this week. Pound Sterling was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.75% | 0.51% | 0.55% | 0.69% | 0.99% | 0.26% | 1.10% | |
| EUR | -0.77% | -0.25% | -0.22% | -0.07% | 0.22% | -0.50% | 0.35% | |
| GBP | -0.55% | 0.21% | 0.01% | 0.15% | 0.45% | -0.28% | 0.56% | |
| CAD | -0.56% | 0.21% | -0.04% | 0.15% | 0.45% | -0.28% | 0.55% | |
| AUD | -0.70% | 0.07% | -0.18% | -0.15% | 0.31% | -0.43% | 0.39% | |
| JPY | -1.00% | -0.22% | -0.47% | -0.43% | -0.33% | -0.72% | 0.14% | |
| NZD | -0.28% | 0.46% | 0.23% | 0.27% | 0.41% | 0.71% | 0.81% | |
| CHF | -1.15% | -0.36% | -0.61% | -0.57% | -0.40% | -0.14% | -0.87% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
The US Bureau of Labor Statistics announced that the annual Consumer Price Index (CPI) rose 3.5%, at a stronger pace than the 3.2% increase recorded in February and the market expectation of 3.4%. Additionally, the core CPI inflation held steady at 3.8% on a yearly basis.
The probability of the Federal Reserve opting for another policy hold in June jumped above 80% after this data from 40% earlier in the day, the CME FedWatch Tool showed. In turn, the USD Index, which tracks the USD's valuation against a basket of six major currencies, advanced to a new 2024-high above 105.00.
Later in the day, the weekly Initial Jobless Claims and the Producer Price Index data for March will be featured in the US economic docket. These data are unlikely to change investors' mind about a further delay in the Fed policy pivot. Nevertheless, a soft producer inflation reading, coupled with a significant increase in the Initial Jobless Claims, could limit the USD's upside with the immediate reaction.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40 despite edging higher in the European session, suggesting that the latest recovery attempt is a technical correction rather than the beginning of a reversal. Additionally, GBP/USD closed well below the 200-day Simple Moving Average after holding above this level in the previous five trading days.
On the downside, interim support seems to have formed at 1.2530 before 1.2500 (static level) and 1.2450 (static level from November). 1.2590 (200-day SMA) aligns as strong resistance before 1.2650 (50-day SMA, 100-day 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, 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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0700 as focus shifts to Fed policy decisions
EUR/USD stays in its daily range below 1.0700 after the data from the US showed that private sector employment rose more than expected in April. The Federal Reserve will announce monetary policy decisions later in the day.
GBP/USD holds steady below 1.2500 ahead of Fed
GBP/USD is off the lows but stays flatlined below 1.2500 on Wednesday. The US Dollar holds its ground after upbeat ADP Employment Change data and doesn't allow the pair to stage a rebound ahead of the Fed's policy decisions.
Gold consolidates losses below $2,300, eyes on Fed policy decision
Gold price hovers below $2,300 as uncertainty ahead of the Fed’s policy announcements improves the appeal of the US Dollar and bond yields. The Fed is expected to hold the policy rate unchanged amid stubborn inflation.
A new stage of Bitcoin's decline
Bitcoin's closing price on Tuesday became the lowest since late February, confirming the downward trend and falling under March and April support and the psychologically important round level.
US Federal Reserve Decision Preview: Markets look for clues about interest rate cut timing
The Federal Reserve is widely anticipated to keep interest rates unchanged. Fed Chairman Powell’s remarks could provide important clues about the timing of the policy pivot.