GBP/USD Forecast: Pound Sterling tests key technical support to start new week
- GBP/USD trades in negative territory near 1.2700 on Monday.
- The renewed USD strength weighs on the pair at the beginning of the week.
- The ISM Manufacturing PMI data will be featured in the US economic calendar.
GBP/USD rose more than 1.5% in the previous week and registered weekly gains for the first time since late September. The pair, however, started the new week under bearish pressure and retreated slightly below 1.2700 by the European morning on Monday.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.73% | 0.38% | 0.32% | 0.40% | 0.30% | 0.38% | 0.55% | |
| EUR | -0.73% | -0.39% | -0.41% | -0.32% | -0.34% | -0.33% | -0.15% | |
| GBP | -0.38% | 0.39% | -0.06% | 0.07% | 0.06% | 0.06% | 0.21% | |
| JPY | -0.32% | 0.41% | 0.06% | 0.11% | 0.05% | 0.13% | 0.21% | |
| CAD | -0.40% | 0.32% | -0.07% | -0.11% | 0.06% | -0.01% | 0.14% | |
| AUD | -0.30% | 0.34% | -0.06% | -0.05% | -0.06% | 0.00% | 0.15% | |
| NZD | -0.38% | 0.33% | -0.06% | -0.13% | 0.01% | -0.00% | 0.18% | |
| CHF | -0.55% | 0.15% | -0.21% | -0.21% | -0.14% | -0.15% | -0.18% |
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 renewed US Dollar (USD) strength forces GBP/USD to stay on the back foot. The market reaction to US President-elect Donald Trump's comments on social media boosted the USD at the weekly opening.
Trump threatened BRICS members with 100% tariffs if they were to try to replace the USD. "We require a commitment from these countries that they will neither create a new BRICS currency, nor back any other currency to replace the mighty US Dollar or, they will face 100% tariffs, and should expect to say goodbye to selling into the wonderful US economy," he said on X.
In addition to Trump comments, the cautious market mood makes it difficult for GBP/USD to gain traction. At the time of press, US stock index futures were down about 0.2% and the UK's FTSE 100 Index was trading marginally lower on the day.
In the second half of the day, the ISM will release November Manufacturing PMI data. In case the headline comes in above 50 and shows a rebound into expansion territory in the manufacturing sector's economic activity, the immediate reaction could help the USD gather further strength. Conversely, a weaker-than-forecast print could have the opposite effect on the currency and allow GBP/USD to hold its ground.
GBP/USD Technical Analysis
Despite the decline seen at the beginning of the week, the Relative Strength Index (RSI) indicator on the 4-hour chart holds slightly above 50 and GBP/USD manages to stay a float a few pips above the 100-period Simple Moving Average, suggesting that the buildup of bearish momentum is not yet strong enough to trigger a reversal.
On the downside, 1.2690 (100-period SMA) aligns as immediate support. If GBP/USD falls below this level and starts using it as resistance, 1.2630 (50-period SMA, static level) could be seen as next support before 1.2600. On the flip side, the pair could face resistance at 1.2750 (static level) ahead of 1.2800 (static level, round level) and 1.2825 (200-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.
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.
