GBP/USD Forecast: Pound Sterling trades near key support area ahead of US data
- GBP/USD trades near 1.3550 in the European session on Thursday.
- The cautious market mood helps the US Dollar hold its ground.
- July Manufacturing and Services PMI data will be featured in the US economic calendar.
GBP/USD corrects lower after closing the first three days of the week in positive territory and fluctuates near 1.3550 on Thursday. Preliminary July Manufacturing and Services Purchasing Managers Index (PMI) data from the US and the market mood could influence the pair's action in the second half of the day.
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 | -1.16% | -1.00% | -1.11% | -0.83% | -1.57% | -1.38% | -1.02% | |
| EUR | 1.16% | 0.24% | 0.05% | 0.31% | -0.46% | -0.42% | 0.10% | |
| GBP | 1.00% | -0.24% | -0.40% | 0.13% | -0.66% | -0.44% | 0.06% | |
| JPY | 1.11% | -0.05% | 0.40% | 0.30% | -0.41% | -0.32% | 0.27% | |
| CAD | 0.83% | -0.31% | -0.13% | -0.30% | -0.67% | -0.56% | -0.24% | |
| AUD | 1.57% | 0.46% | 0.66% | 0.41% | 0.67% | 0.12% | 0.69% | |
| NZD | 1.38% | 0.42% | 0.44% | 0.32% | 0.56% | -0.12% | 0.50% | |
| CHF | 1.02% | -0.10% | -0.06% | -0.27% | 0.24% | -0.69% | -0.50% |
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) struggled to find demand on Wednesday and allowed GBP/USD to push higher as risk flows dominated the action in financial markets on the announcement of a trade deal between the US and Japan.
The data from the UK showed on Thursday that the economic activity in the private sector expanded at a softer pace than expected in July, with the S&P Global Composite PMI declining to 51 in July from 52 in June and missing the market expectation of 51.9.
Meanwhile, markets adopt a cautious stance, with US stock index futures trading mixed in the European session. In case either of the headline PMIs from the US unexpectedly come in below 50, the USD could come under renewed selling pressure with the immediate reaction and allow GBP/USD to regain its traction. Conversely, the USD could hold its ground and cap the pair's upside if the PMI data arrive near or above analysts' estimates.
The White House announced on Wednesday that US President Donald Trump will visit the Federal Reserve (Fed) on Thursday. Investors could stay away from taking risk-sensitive positions while waiting for fresh developments on the feud between Trump and Fed Chairman Jerome Powell. In this scenario, GBP/USD could have a difficult time shaking off the bearish pressure.
GBP/USD Technical Analysis
GBP/USD trades near the 1.3550-1.3540 area, where the 200-period Simple Moving Average (SMA), 100-period SMA and the Fibonacci 38.2% retracement of the latest uptrend align. In case the pair drops below this area and starts using it as resistance, technical sellers could take action and open the door for an extended correction toward 1.3500 (static level, round level) and 1.3470 (Fibonacci 50% retracement).
Looking north, resistance levels could be spotted at 1.3600 (static level, round level) and 1.3630 (Fibonacci 23.6% retracement).
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.
