GBP/USD Forecast: Pound Sterling under bearish pressure ahead of Fed
- GBP/USD trades in negative territory below 1.3350 on Wednesday.
- The technical outlook is yet to point to a buildup of directional momentum.
- The Fed will announce monetary policy decisions later in the day.
After posting gains to start the week, GBP/USD edges lower and trades in negative territory below 1.3350 in the European session on Wednesday as investors gear up for the Federal Reserve's (Fed) monetary policy announcements.
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 | 0.04% | 0.20% | 0.59% | 0.15% | 0.37% | 0.34% | 0.14% | |
| EUR | -0.04% | 0.16% | 0.55% | 0.10% | 0.33% | 0.30% | 0.10% | |
| GBP | -0.20% | -0.16% | 0.36% | -0.05% | 0.17% | 0.14% | -0.06% | |
| JPY | -0.59% | -0.55% | -0.36% | -0.43% | -0.22% | -0.18% | -0.40% | |
| CAD | -0.15% | -0.10% | 0.05% | 0.43% | 0.23% | 0.20% | -0.01% | |
| AUD | -0.37% | -0.33% | -0.17% | 0.22% | -0.23% | -0.02% | -0.21% | |
| NZD | -0.34% | -0.30% | -0.14% | 0.18% | -0.20% | 0.02% | -0.20% | |
| CHF | -0.14% | -0.10% | 0.06% | 0.40% | 0.00% | 0.21% | 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 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) stays resilient against its peers midweek on improving risk mood. Washington confirmed that United States (US) Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet China's economic tsar He Lifeng in Geneva this Saturday, to kick off official talks with China.
The Fed is expected to leave the policy rate unchanged at 4.25%-4.5% after the May policy meeting. Since such a decision is already priced in, the statement language and Chairman Jerome Powell's comments in the post-meeting press conference could impact the USD's valuation.
In case Powell sticks to a cautious tone on future policy-easing by reiterating the need for more time to assess the impact of tariffs on the inflation outlook, the USD could start gathering strength with the immediate reaction and weigh on GBP/USD. On the other hand, the USD could weaken against its rivals if Powell puts more emphasis on the heightened risk of an economic downturn following the disappointing first-quarter Gross Domestic Product (GDP) data and mentions worsening conditions in the labor market.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart retreats toward 50 after rising above 60 earlier in the week, highlighting buyers' hesitancy.
On the downside, first support could be seen at 1.3270-1.3280 (20-day Simple Moving Average (SMA), Fibonacci 23.6% retracement of the latest uptrend) before 1.3200 (static level, round level) and 1.3165 (Fibonacci 38.2% retracement). Looking north, resistances could be spotted at 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.
