GBP/USD Forecast: Pound Sterling stabilizes near 1.2800 as markets await next catalyst

  • GBP/USD fluctuates in a tight range near 1.2800 after posting small losses on Tuesday.
  • The pair's bullish bias remains intact but the momentum weakens.
  • Fed Chairman Powell will testify before House Financial Services Committee.

GBP/USD edged lower during the American trading hours on Tuesday and closed the day in negative territory. The pair holds steady near 1.2800 in the European session on Wednesday as investors refrain from taking large positions while awaiting the next fundamental driver.

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 New Zealand Dollar.

USD   0.15% 0.08% 0.50% -0.10% 0.14% 1.08% 0.16%
EUR -0.15%   0.13% 0.68% 0.07% 0.15% 1.27% 0.37%
GBP -0.08% -0.13%   0.52% -0.04% 0.02% 1.14% 0.21%
JPY -0.50% -0.68% -0.52%   -0.60% -0.34% 0.74% -0.29%
CAD 0.10% -0.07% 0.04% 0.60%   0.20% 1.18% 0.26%
AUD -0.14% -0.15% -0.02% 0.34% -0.20%   1.12% 0.19%
NZD -1.08% -1.27% -1.14% -0.74% -1.18% -1.12%   -0.92%
CHF -0.16% -0.37% -0.21% 0.29% -0.26% -0.19% 0.92%  

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).

Federal Reserve (Fed) Chairman Jerome Powell presented the Semi-Annual Monetary Policy Report and responded to questions before the Senate Banking Committee on the first day of his Congressional testimony on Tuesday.

Powell reiterated that it will not be appropriate to lower the policy rate until they gain greater confidence in inflation heading sustainably toward 2%. Assessing the developments in the job market, "the most recent labor market data sent a pretty clear signal that the labor market has cooled considerably," Powell said.

Following these remarks, the probability of the Fed leaving the policy rate unchanged in September stays near 25%, according to the CME FedWatch Tool.

Powell will testify before the House Financial Services Committee later in the day. Investors, however, are likely to await Thursday's June Consumer Price Index (CPI) data before deciding on the next direction for GBP/USD.

GBP/USD Technical Analysis

The Relative Strength Index edged higher to 60 after falling toward 50 late Tuesday, suggesting that the bullish bias remains intact, albeit lacking momentum.

In case GBP/USD continues to use 1.2800 (psychological level, static level) as support, 1.2850-1.2860 (static level, June 12 high) could be seen as next resistance before 1.2900 (psychological level, static level). If 1.2800 support fails, an extended slide toward 1.2750 (static level) and 1.2710 (20-day Simple Moving Average) could be seen.

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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