GBP/USD Forecast: Pound Sterling struggles to attract buyers
- GBP/USD trades above 1.3300 in the European session on Tuesday.
- The US economic calendar will not feature high-impact data releases.
- The near-term technical outlook fails to offer a directional clue.
GBP/USD stays in positive territory above 1.3300 in the European session on Tuesday after posting small gains on Monday. The technical outlook, however, fails to provide any directional clues as investors remain reluctant to take large positions ahead of the Federal Reserve (Fed) and the Bank of England's (BoE) monetary policy 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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | -0.48% | -1.05% | 0.15% | 0.07% | -0.41% | -0.01% | |
| EUR | -0.16% | -0.36% | -0.94% | 0.26% | 0.17% | -0.30% | 0.09% | |
| GBP | 0.48% | 0.36% | -0.78% | 0.63% | 0.55% | 0.06% | 0.45% | |
| JPY | 1.05% | 0.94% | 0.78% | 1.21% | 1.13% | 0.72% | 1.15% | |
| CAD | -0.15% | -0.26% | -0.63% | -1.21% | -0.39% | -0.56% | -0.17% | |
| AUD | -0.07% | -0.17% | -0.55% | -1.13% | 0.39% | -0.48% | -0.09% | |
| NZD | 0.41% | 0.30% | -0.06% | -0.72% | 0.56% | 0.48% | 0.38% | |
| CHF | 0.01% | -0.09% | -0.45% | -1.15% | 0.17% | 0.09% | -0.38% |
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) found support in the second half of the day on Monday and limited GBP/USD's upside as markets assessed the US data.
The ISM Services Purchasing Managers Index (PMI) rose to 51.6 in April from 50.8 in March. Additionally, the Prices Paid Index of the PMI survey, the inflation component, climbed to 65.1 from 60.9, pointing to an acceleration in the input inflation in the service sector.
Meanwhile, growing optimism about the US coming to terms with its partners on trade helped the USD hold its ground. US Commerce Secretary Howard Lutnick told Fox Business that they are hoping to announce trade deals soon, while US Treasury Scott Bessent said that they are very close to reaching some agreements on trade.
Early Tuesday, the cautious market mood makes it difficult for GBP/USD to gather bullish momentum. At the time of press, US stock index futures were down between 0.6% and 1%. Nevertheless, a bearish opening in Wall Street could hurt the USD in the American session and allow GBP/USD to keep its footing.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat slightly above 50 and GBP/USD continues to fluctuate at around the 100-period, 50-period and 20-period Simple Moving Averages (SMA), highlighting a lack of directional momentum.
Looking south, first support could be seen at 1.3270 (Fibonacci 23.6% retracement of the latest uptrend) before 1.3240 (20-day SMA) and 1.3165 (Fibonacci 38.2% retracement). On the upside, immediate resistance is located at 1.3330-1.3340 (50-period SMA, static level) ahead of 1.3400 (round level, static level) and 1.3450 (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, 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.
