GBP/USD Forecast: Pound Sterling stays directionless below 1.2550
- GBP/USD moves sideways below 1.2550 in the European morning on Tuesday.
- The pair could have a difficult time finding direction in the near term.
- Financial markets in the US will close early on Christmas Eve.
GBP/USD moves sideways in a tight range below 1.2550 in the European morning on Tuesday after posting small losses on Monday. The pair is likely to have a hard time finding direction in the near term, with trading conditions remaining thin heading into the Christmas holiday.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.09% | 1.17% | 1.85% | 0.93% | 2.03% | 2.35% | 0.56% | |
| EUR | -1.09% | 0.09% | 0.75% | -0.15% | 0.92% | 1.25% | -0.52% | |
| GBP | -1.17% | -0.09% | 0.69% | -0.24% | 0.84% | 1.16% | -0.59% | |
| JPY | -1.85% | -0.75% | -0.69% | -0.91% | 0.22% | 0.52% | -1.21% | |
| CAD | -0.93% | 0.15% | 0.24% | 0.91% | 1.10% | 1.41% | -0.35% | |
| AUD | -2.03% | -0.92% | -0.84% | -0.22% | -1.10% | 0.31% | -1.44% | |
| NZD | -2.35% | -1.25% | -1.16% | -0.52% | -1.41% | -0.31% | -1.73% | |
| CHF | -0.56% | 0.52% | 0.59% | 1.21% | 0.35% | 1.44% | 1.73% |
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 held its ground on Monday but struggled to gather strength following mixed macroeconomic data releases from the US.
The US Census Bureau announced that Durable Goods Orders declined by 1.1% on a monthly basis in November, coming in worse than analysts' estimate for a decrease of 0.4%. Meanwhile, the Conference Board's Consumer Confidence Index worsened to 104.7 in December from 112.8 (revised from 111.7) in November. On a positive note, New Home Sales rose by 5.9% in November after the 14.8% decrease recorded in October.
The economic calendar will not feature any macroeconomic data releases until Thursday. Bond and stock markets in the US will operate half day on Tuesday and remain closed on Christmas Day on Wednesday.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways below 50 and GBP/USD trades slightly below the 20-period Simple Moving Average (SMA), suggesting that the bearish bias remains intact, while lacking momentum.
In case 1.2550 (static level) continues to act as resistance, technical sellers could remain interested. In this scenario, 1.2480 (static level) and 1.2400 (static level, round level) could be seen as next support levels. On the upside, resistances align at t 1.2600-1.2610 (static level, 50-period SMA) and 1.2670 (100-period SMA).
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.
