GBP/USD Forecast: Pound Sterling rises above key level, attracts bulls
- GBP/USD trades in positive territory above 1.2700 in the European session.
- Financial markets in the US will close early on Friday.
- Improving risk mood could help the pair stretch higher ahead of the weekend.
After posting small gains on Thursday, GBP/USD gathered bullish momentum and climbed to its highest level in over two weeks at 1.2750 early Friday.
Following the Thanksgiving Day holiday in the US, the US Dollar (USD) came under renewed selling pressure amid a positive shift seen in risk mood in the Asian session and helped GBP/USD gain traction. Additionally, US Treasury bond yields continued to stretch lower, making it difficult for the USD to find a foothold.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.47% | -1.40% | -2.61% | 0.37% | -0.15% | -1.04% | -1.26% | |
| EUR | 1.47% | -0.10% | -1.75% | 1.25% | 1.26% | -0.15% | -0.37% | |
| GBP | 1.40% | 0.10% | -1.66% | 1.37% | 1.37% | -0.04% | -0.27% | |
| JPY | 2.61% | 1.75% | 1.66% | 3.06% | 2.97% | 1.68% | 1.58% | |
| CAD | -0.37% | -1.25% | -1.37% | -3.06% | -0.36% | -1.38% | -1.64% | |
| AUD | 0.15% | -1.26% | -1.37% | -2.97% | 0.36% | -1.39% | -1.61% | |
| NZD | 1.04% | 0.15% | 0.04% | -1.68% | 1.38% | 1.39% | -0.22% | |
| CHF | 1.26% | 0.37% | 0.27% | -1.58% | 1.64% | 1.61% | 0.22% |
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).
At the time of press, US stock index futures were up between 0.3% and 0.4%, while the UK's FTSE 100 Index was trading flat on the day.
Later in the session, the Bank of England (BoE) will publish the Financial Stability Report, which is unlikely to trigger a significant market reaction. The US economic calendar will not offer any high-impact macroeconomic data releases. Moreover, stock and bond markets in the US will close early. Hence, the trading action is likely to turn subdued heading into the weekend. Month-end flows and position adjustments on the last business day of November, however, could ramp up market volatility and trigger irregular action in GBP/USD toward the end of the European session.
GBP/USD Technical Analysis
GBP/USD was last seen trading slightly above 1.2700, where the 100-period Simple Moving Average (SMA) on the 4-hour chart is located. While this level remains intact as support, technical buyers could remain interested. On the upside, 1.2760 (static level) aligns as next resistance before 1.2800 (round level, static level) and 1.2835 (200-period SMA).
In case 1.2700 support fails, 1.2640 (20-period SMA, static level) could be seen as next support ahead of 1.2600 (static level, round 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.
