GBP/USD Forecast: Pound Sterling stabilizes, maintains bullish bias
- GBP/USD moves sideways in a tight range slightly above 1.3200.
- Improving risk mood could help the pair hold its ground.
- The US economic calendar will feature Retail Sales data for August.
GBP/USD started the week on a bullish note and registered impressive gains on Monday. The pair seems to have entered into a consolidation phase above 1.3200 in the European morning on Tuesday. Investors could refrain from taking large positions ahead of key data releases and central bank meetings.
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 | -0.63% | -0.79% | -0.10% | -0.11% | -0.89% | -0.77% | -0.52% | |
| EUR | 0.63% | -0.23% | 0.50% | 0.49% | -0.32% | -0.20% | 0.06% | |
| GBP | 0.79% | 0.23% | 0.63% | 0.71% | -0.10% | 0.04% | 0.30% | |
| JPY | 0.10% | -0.50% | -0.63% | -0.01% | -0.74% | -0.65% | -0.48% | |
| CAD | 0.11% | -0.49% | -0.71% | 0.00% | -0.87% | -0.66% | -0.52% | |
| AUD | 0.89% | 0.32% | 0.10% | 0.74% | 0.87% | 0.13% | 0.37% | |
| NZD | 0.77% | 0.20% | -0.04% | 0.65% | 0.66% | -0.13% | 0.26% | |
| CHF | 0.52% | -0.06% | -0.30% | 0.48% | 0.52% | -0.37% | -0.26% |
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 selling pressure surrounding the US Dollar (USD) fuelled a leg higher in GBP/USD on Monday. The improving risk mood amid growing optimism about a large Federal Reserve (Fed) rate reduction this Wednesday weighed heavily on the USD.
Early Tuesday, US stock index futures trade in positive territory. In case risk flows continue to dominate the financial markets in the second half of the day, GBP/USD could hold its ground.
The US economic calendar will feature Retail Sales data for August later in the day. Investors expect a monthly increase of 0.2% following the 1% growth in July. Although an upbeat reading could support the USD, it is unlikely to have a lasting impact on the currency's valuation before the Fed's policy announcements.
Early Wednesday, the UK's Office for National Statistics will publish Consumer Price Index (CPI) data for August. The Bank of England (BoE) will release the interest rate decision on Thursday.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 70, suggesting that GBP/USD could turn overbought in case it continues to push higher in the short term. Nevertheless, the pair maintains its bullish bias with the 20-period Simple Moving Average (SMA) rising above slightly above the 100-period SMA.
On the downside, 1.3200 (static level) aligns as immediate support before 1.3150-1.3140 (100-period SMA, Fibonacci 38.2% retracement of the latest uptrend) and 1.3100 (static level). The first resistance could be seen at 1.3260 (end-point of the latest uptrend) before 1.3300 (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, aka ‘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.
