GBP/USD Forecast: Pound Sterling stabilizes ahead of US data
- GBP/USD moves sideways near 1.3550 in the European session on Friday.
- The US UoM Consumer Sentiment Index will be the last data release of the week.
- The cautious market stance could limit the pair's upside heading into the weekend.
GBP/USD stays under modest bearish pressure and trades at around 1.3550 after gaining about 0.3% on Thursday. Although the technical outlook is yet to point to a buildup in bearish momentum, the pair could find it difficult to hold its ground in case safe-haven flows dominate the action in financial markets heading into the weekend.
Pound Sterling 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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.41% | -0.33% | 0.03% | -1.47% | -1.03% | -0.27% | |
| EUR | 0.19% | -0.23% | -0.07% | 0.20% | -1.28% | -0.79% | -0.07% | |
| GBP | 0.41% | 0.23% | 0.06% | 0.44% | -1.05% | -0.57% | 0.15% | |
| JPY | 0.33% | 0.07% | -0.06% | 0.29% | -1.17% | -0.85% | 0.08% | |
| CAD | -0.03% | -0.20% | -0.44% | -0.29% | -1.41% | -1.00% | -0.29% | |
| AUD | 1.47% | 1.28% | 1.05% | 1.17% | 1.41% | 0.48% | 1.22% | |
| NZD | 1.03% | 0.79% | 0.57% | 0.85% | 1.00% | -0.48% | 0.73% | |
| CHF | 0.27% | 0.07% | -0.15% | -0.08% | 0.29% | -1.22% | -0.73% |
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 (USD) weakened against its rivals and allowed GBP/USD to stretch higher following the mixed macroeconomic data releases on Thursday.
The US Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) rose 2.9% on a yearly basis in August. Additionally, the core CPI, which excludes volatile food and energy prices, increased 0.3% on a monthly basis. Both of these figures came in line with analysts' estimates.
Other data from the US showed that the number of first-time applications for unemployment benefits climbed to 263,000 in the week ending September 6 from 236,000 in the previous week. This data revived fears over worsening conditions in the US labor market and weighed on the USD.
Later in the American session, the University of Michigan (UoM) will publish the preliminary Consumer Sentiment Index data for September. Rather than the headline number, markets could react to the 1-year Consumer Inflation Expectations component of the survey. A noticeable increase in this data could be supportive for the USD and cause GBP/USD to edge lower with the immediate reaction.
Meanwhile, US stock index futures trade mixed in the European session. A bearish opening in Wall Street could help the USD outperform its rivals and hurt GBP/USD. Conversely, an improving market mood is likely to open the door for a recovery in the pair.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator holds above 50 and GBP/USD trades above the 20-period Simple Moving Average (SMA), reflecting sellers' hesitancy.
On the downside, the first support level could be spotted at 1.3500 (static level, round level) ahead of 1.3470-1.3460 (20-day SMA, 50-day SMA, Fibonacci 50% retracement of the latest downtrend) and 1.3450 (200-period SMA). Looking north, resistance levels could be spotted at 1.3590-1.3600 (static level, round level) and 1.3640 (Fibonacci 78.6% 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.
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
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.
