GBP/USD Forecast: Pound Sterling shows no signs of slowing down
- GBP/USD extends weekly uptrend toward 1.2600, trades at a fresh multi-week high.
- The near-term technical outlook points to overbought conditions.
- The pair's losses are likely to remain limited unless there is a negative shift in risk mood.
GBP/USD preserves its bullish momentum and trades at its highest level since late December near 1.2600. Although the pair's near-term technical outlook points to overbought conditions, investors could refrain from betting on a deep correction unless there is a significant negative shift in risk mood.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.44% | -1.49% | 0.93% | -0.84% | -0.99% | -0.69% | -0.68% | |
| EUR | 1.44% | 0.03% | 2.56% | 0.72% | 0.46% | 0.85% | 0.84% | |
| GBP | 1.49% | -0.03% | 2.36% | 0.67% | 0.43% | 0.82% | 0.82% | |
| JPY | -0.93% | -2.56% | -2.36% | -1.82% | -1.87% | -1.64% | -1.61% | |
| CAD | 0.84% | -0.72% | -0.67% | 1.82% | -0.12% | 0.12% | 0.12% | |
| AUD | 0.99% | -0.46% | -0.43% | 1.87% | 0.12% | 0.39% | 0.40% | |
| NZD | 0.69% | -0.85% | -0.82% | 1.64% | -0.12% | -0.39% | 0.00% | |
| CHF | 0.68% | -0.84% | -0.82% | 1.61% | -0.12% | -0.40% | -0.00% |
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 US Dollar came under heavy selling pressure in the American session on Thursday and opened the door for a leg higher in GBP/USD as risk flows dominated the action in financial markets.
US President Donald Trump refrained from announcing new reciprocal tariffs on Thursday, instead he explained that he tasked his economics team to devise a plan for reciprocal tariffs on every country that charges duties on US imports, triggering a risk rally.
At the time of press, US stock index futures were trading flat on the day. In case Wall Street's main indexes open on a bullish note and continue to push higher heading into the weekend, GBP/USD could continue to build on its weekly gains.
The US Census Bureau will publish Retail Sales data for January. Following the 0.4% increase recorded in December, investors foresee a 0.1% decline in January. A noticeable positive surprise, with a reading of 0.5% or higher, could help the US Dollar (USD) gather strength and limit GBP/USD upside.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays above 70, suggesting that GBP/USD could have a hard time pushing higher before making a technical correction.
On the upside, 1.2600 (static level, round level) aligns as immediate resistance before 1.2650 (Fibonacci 78.6% retracement level of the latest downtrend) and 1.2700-1.2710 (round level, static level).
Looking south, first support could be seen at 1.2530 (Fibonacci 61.8% retracement) ahead of 1.2500 (psychological level, static level) and 1.2450 (Fibonacci 50% retracement).
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.
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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.
