GBP/USD Forecast: Sellers could ignore oversold conditions if US jobs data beat expectations
- GBP/USD trades at its lowest level since mid-May below 1.3200.
- The near-term technical outlook points to extreme oversold conditions.
- The US economic calendar will feature July employment data.
GBP/USD remains under bearish pressure and trades at its weakest level since mid-May below 1.3200 after closing the previous six trading days in negative territory. Although the pair remains oversold in the short term, investors could ignore technical conditions when assessing the July labor market data from the US.
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 weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 3.05% | 2.01% | 1.93% | 1.20% | 2.35% | 2.56% | 2.46% | |
| EUR | -3.05% | -1.03% | -1.07% | -1.79% | -0.68% | -0.48% | -0.57% | |
| GBP | -2.01% | 1.03% | -0.22% | -0.77% | 0.36% | 0.56% | 0.46% | |
| JPY | -1.93% | 1.07% | 0.22% | -0.70% | 0.38% | 0.60% | 0.66% | |
| CAD | -1.20% | 1.79% | 0.77% | 0.70% | 1.11% | 1.34% | 1.24% | |
| AUD | -2.35% | 0.68% | -0.36% | -0.38% | -1.11% | 0.20% | 0.10% | |
| NZD | -2.56% | 0.48% | -0.56% | -0.60% | -1.34% | -0.20% | -0.09% | |
| CHF | -2.46% | 0.57% | -0.46% | -0.66% | -1.24% | -0.10% | 0.09% |
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).
Although the US Dollar (USD) lost its bullish momentum after the strong rally seen on Wednesday, GBP/USD failed to stage a rebound as markets turned risk-averse. US President Donald Trump announced that they raised the tariff rate on Canadian imports to 35% from 25% late Thursday, causing investors to adopt a cautious stance. Early Friday, US stock index futures lose about 1%, suggesting that safe-haven flows continue to dominate the action in financial markets in the European session.
The US Bureau of Labor Statistics (BLS) will release Nonfarm Payrolls (NFP) and the Unemployment Rate data for July later in the day. Investors see the Unemployment Rate edging higher to 4.2% and expect Nonfarm Payrolls (NFP) to rise by 110,000.
A positive surprise in NFP, with a reading above 130,000, could allow investors to refrain from pricing in a Federal Reserve (Fed) rate cut in September and fuel another leg higher in the USD. Conversely, GBP/USD could erase a small portion of its weekly losses if the Unemployment Rate comes in above the market expectation and NFP rises by less than 90,000.
According to the CME FedWatch Tool, markets are currently pricing in about 40% probability of the Fed lowering the policy rate by 25 basis points at the September meeting.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 20 and GBP/USD trades slightly below the lower limit of the descending regression channel, reflecting extreme oversold conditions.
On the downside, 1.3100 (round level, static level) could be seen as the next support before 1.3030 (static level). Looking north, resistance levels could be seen at 1.3200 (static level, round level), 1.3230 (static level) and 1.3275 (20-period Simple Moving Average).
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.
