GBP/USD Forecast: Pound Sterling turns neutral above 1.2600
- GBP/USD went into a consolidation phase above 1.2600.
- The near-term technical outlook doesn't point to a buildup of directional momentum.
- Trading action could remain subdued on Easter Monday.
Following Friday's indecisive action, GBP/USD extends its sideways grind above 1.2600 to start the new week. The pair's technical outlook doesn't offer any directional clues as conditions remain thin on Easter Monday.
Pound Sterling price in the last 7 days
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies in the last 7 days. Pound Sterling was the weakest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.18% | -0.17% | -0.58% | -0.14% | 0.03% | 0.12% | 0.37% | |
| EUR | -0.17% | -0.34% | -0.76% | -0.30% | -0.15% | -0.01% | 0.19% | |
| GBP | 0.17% | 0.35% | -0.40% | 0.04% | 0.20% | 0.34% | 0.54% | |
| CAD | 0.56% | 0.73% | 0.39% | 0.43% | 0.59% | 0.73% | 0.92% | |
| AUD | 0.15% | 0.31% | -0.02% | -0.44% | 0.15% | 0.26% | 0.50% | |
| JPY | -0.03% | 0.17% | -0.10% | -0.60% | -0.16% | 0.13% | 0.32% | |
| NZD | -0.17% | 0.06% | -0.28% | -0.70% | -0.26% | -0.10% | 0.24% | |
| CHF | -0.36% | -0.19% | -0.54% | -0.94% | -0.49% | -0.33% | -0.20% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
US stock index futures trade in positive territory on Monday, suggesting that Wall Street's could open higher following the long weekend. The US Bureau of Economic Analysis reported on Friday that the core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, edged lower to 2.8% on a yearly basis in February from 2.9% in January.
According to the CME FedWatch Tool, the probability of the Fed leaving the policy rate unchanged in June declined to 30% from 40% before the PCE inflation data.
In the second half of the day, the ISM Manufacturing PMI will be featured in the US economic docket. In case the headline PMI recovers above 50, the initial reaction could help the USD stay resilient against its rivals and make it difficult for GBP/USD to gain traction. Market participants will also pay close attention to the Price Paid Index of the Survey, also known as the inflation component. If this index continues to rise, investors could see that as a sign of sticky inflation and cause investors to reassess the probability of a rate cut in June.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays flat near 50, highlighting a neutral bias. The 200-day SMA forms critical support at 1.2590. A daily close below this level could attract technical sellers and open the door for an extended slide toward 1.2550 (beginning point of the latest uptrend) and 1.2500 (static level).
On the upside, 1.2640 (100-day SMA) aligns as next resistance before 1.2670-1.2680 (Fibonacci 61.8% retracement of the latest uptrend, 200-period SMA on the 4-hour chart, 50-day 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, 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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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.
