GBP/USD Forecast: Pound Sterling remains fragile ahead of US data
- GBP/USD holds above 1.3300 following a two-day slide.
- US stock index futures trade decisively higher in the European session.
- The pair could stretch lower if 1.3275 support fails.
GBP/USD staged a rebound and stabilized above 1.3300 after falling toward 1.3270 early Thursday. The pair's technical outlook is yet to point to a buildup of bullish momentum as investors await macroeconomic data releases from the US.
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 weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.41% | -0.04% | 0.52% | -0.35% | 0.28% | 0.59% | -0.26% | |
| EUR | -0.41% | -0.50% | 0.10% | -0.77% | -0.24% | 0.17% | -0.69% | |
| GBP | 0.04% | 0.50% | 0.62% | -0.25% | 0.26% | 0.68% | -0.17% | |
| JPY | -0.52% | -0.10% | -0.62% | -0.85% | -0.21% | -1.34% | -0.52% | |
| CAD | 0.35% | 0.77% | 0.25% | 0.85% | 0.51% | 0.94% | 0.09% | |
| AUD | -0.28% | 0.24% | -0.26% | 0.21% | -0.51% | 0.41% | -0.45% | |
| NZD | -0.59% | -0.17% | -0.68% | 1.34% | -0.94% | -0.41% | -0.84% | |
| CHF | 0.26% | 0.69% | 0.17% | 0.52% | -0.09% | 0.45% | 0.84% |
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 came under bearish pressure midweek as the US Dollar (USD) preserved its strength despite the disappointing growth reading.
The US Bureau of Economic Analysis reported on Wednesday that the US' Gross Domestic Product (GDP) contracted at an annual rate of 0.3% in the first quarter, according to the initial estimate. Other data showed that the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose 2.6% on a yearly basis in March, remaining well above the Fed's target of 2%.
Meanwhile, growing optimism about a softening US trade rhetoric continues to support the USD. US President Donald Trump said on Wednesday that there was a very good probability that they will reach a deal with China. Although US Trade Representative Jamieson Greer told reporters that no official talks with China were underway, he noted that he expects to conclude initial tariff deals with some trading partners within weeks. Reflecting the upbeat risk mood, US stock index futures rise between 0.7% and 1.7% on the day.
In the American session, the US Department of Labor will publish weekly Initial Jobless Claims data and the ISM will release the Manufacturing Purchasing Managers' Index (PMI) report for April.
The headline PMI is expected to stay in contraction territory below 50. The Prices Paid Index of the PMI survey is seen rising to 70.3 from 69.4. A bigger-than-forecast increase in this inflation component could support the USD. On the other hand, a significant negative surprise in the headline PMI could trigger a USD selloff and help GBP/USD push higher with the immediate reaction.
GBP/USD Technical Analysis
GBP/USD closed the last four 4-hour candles below the 20-period and the 50-period Simple Moving Averages (SMA). Additionally, the Relative Strength Index (RSI) indicator stays below 50, pointing to a lack of buyer interest.
On the downside, 1.3275 (Fibonacci 23.6% retracement) aligns as first support level before 1.3240 (100-period SMA) and 1.3170 (Fibonacci 38.2% retracement). Looking north, resistances could be spotted at 1.3340 (50-period SMA), 1.3400 (round level, static level), 1.3440 (static level).
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.
