GBP/USD Forecast: Pound Sterling recovery attempts to remain as technical corrections

GBP/USD extended its weekly decline to the 1.2250 area.
Bank of England left the interest rate unchanged at 5.25% after the September meeting.
The pair could find it difficult to stage a steady rebound in the near term.

Eren Sengezer FXStreet

GBP/USD closed the second consecutive day in negative territory on Thursday and extended its slide to the 1.2250 area early Friday. The pair's near-term technical outlook highlights oversold conditions but a convincing recovery could be hard to come by.

The Bank of England went against the market expectation of a 25 basis points rate hike and left the interest rate unchanged at 5.25% in a split vote. A majority of the Monetary Policy Committee cited the loosening labor market, soft August inflation data and falling business sentiment as validation to hold the rate steady, the BoE's policy statement showed.

According to Reuters' calculations, markets are currently pricing in a 75% probability that the BoE will keep the rate steady in November. BNP Paribas and UBS both came out with statements following the BoE event and said that they lowered terminal rate projections to 5.25% from 5.5%.

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 New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.23%	1.23%	-0.45%	0.05%	0.29%	-0.86%	0.98%
EUR	-0.23%		1.00%	-0.68%	-0.18%	0.06%	-1.09%	0.76%
GBP	-1.26%	-1.03%		-1.72%	-1.21%	-0.99%	-2.11%	-0.28%
CAD	0.44%	0.66%	1.68%		0.48%	0.70%	-0.41%	1.40%
AUD	-0.03%	0.18%	1.20%	-0.47%		0.22%	-0.90%	0.93%
JPY	-0.29%	-0.07%	0.94%	-0.71%	-0.23%		-1.16%	0.71%
NZD	0.85%	1.09%	2.08%	0.41%	0.89%	1.12%		1.83%
CHF	-1.00%	-0.76%	0.25%	-1.42%	-0.97%	-0.72%	-1.86%

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).

Meanwhile, the data from the UK showed early Friday that Retail Sales rose 0.4% on a monthly basis in August following the 1.1% decrease recorded in July. Additionally, S&P Global/CIPS Composite PMI declined to 46.8 in August from 48.6 in July, highlighting an ongoing contraction in the private sector's activity.

Assessing the report's findings, “private sector businesses reported that output fell at the sharpest rate since March 2009, outside the lockdown years and inevitably job creation followed suit as headcounts reduced at the fastest level since October 2009," said Dr John Glen, CIPS Chief Economist. "Manufacturers experienced a rapid fall in pipelines of work as their backlogs shrunk at the fastest pace since February 2009."

The worsening UK economic outlook is likely to force the BoE to refrain from further tightening policy. Hence, the widening policy divergence between the Federal Reserve and the BoE could cause GBP/USD to stay in a downtrend.

GBP/USD Technical Analysis

GBP/USD dropped below the lower limit of the descending regression channel and the Relative Strength Index (RSI) indicator on the 4-hour chart fell below 30, highlighting oversold conditions for the pair.

1.2240 (static level from March) aligns as immediate support for the pair. A four-hour close below that level could open the door for another leg lower toward 1.2200 (psychological level, static level) and 1.2140 (static level from January).

Looking north, GBP/USD needs to climb above 1.2260 (lower limit of the descending channel) and stabilize there to extend its correction. 1.2300 (mid-point of the descending channel) and 1.2330 (upper limit of the descending channel) could be seen as resistances in this scenario.

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.

GBP/USD clings to multi-day peaks below 1.3500

GBP/USD trades with marked gains on Friday, now giving away some gains following an earlier surpass of the key 1.3500 yardstick. Indeed, Cable gathers fresh steam amid the strong offered stance in the Greenback, all after US NFP badly missed expectations in July.

EUR/USD: Post-NFP bounce falters around 1.1580

EUR/USD reverses Thursday’s decline and trades with solid gains in the 1.1560 region, or two-month peaks, on Friday. The pair’s firm performance comes in a context of a sharp correction in the US Dollar as investors continue to assess disheartening US NFP readings.

How Wall Street rigs the game [Video]

In this week’s Live from the Vault, Andrew Maguire is joined by Peter Antico and Sean Stone to discuss the Paradigm of Money - an in-depth expose of financial market corruption, from naked shorting to the two-tier system that protects Wall Street.

XRP Price Forecast: XRP nears critical $1.00 support

Ripple (XRP) remains pressured on Friday, trading around $1.03 at the time of writing. The token appears to hold this current level as support but lacks a catalyst to sustain a knee-jerk rebound toward the next key resistance at $1.10.

Is Gold about to enter its biggest bull run since 2020?

Gold has stormed back into the spotlight and its next move could leave late buyers chasing. On August 5, the yellow metal surged almost 7% – roughly $174 – to close near $4,308 an ounce, posting one of its biggest daily advances in recent history. A weaker U.S dollar, falling Treasury yields, changing Federal Reserve expectations and renewed safe-haven demand all struck at once.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.