|

GBP/USD Forecast: UK employment data help Pound Sterling hold its ground

  • GBP/USD holds steady above 1.3050 in the European session on Tuesday.
  • Upbeat labor market data from the UK help Pound Sterling stay resilient against its peers.
  • The near-term technical picture points to a loss of bearish momentum.

GBP/USD fluctuated in a narrow range on Monday and closed the day virtually unchanged. The pair edges slightly higher in the European morning on Tuesday and trades above 1.3050.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Australian Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.00%-0.10%-0.48%0.11%0.22%0.13%-0.21%
EUR-0.01% -0.10%-0.49%0.08%0.22%0.10%-0.19%
GBP0.10%0.10% -0.37%0.21%0.32%0.21%-0.05%
JPY0.48%0.49%0.37% 0.59%0.68%0.58%0.30%
CAD-0.11%-0.08%-0.21%-0.59% 0.11%0.02%-0.26%
AUD-0.22%-0.22%-0.32%-0.68%-0.11% -0.10%-0.36%
NZD-0.13%-0.10%-0.21%-0.58%-0.02%0.10% -0.28%
CHF0.21%0.19%0.05%-0.30%0.26%0.36%0.28% 

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 data published by the UK's Office for National Statistics (ONS) showed early Tuesday that the ILO Unemployment Rate eased to 4.0% in the three months to August, following July’s 4.1% reading. Additional details of the report showed the Employment Change data for August arrived at 373K, compared to 265k reported in July. Finally, wage inflation, as measured by the changed in the Average Earnings excluding Bonus, softened to 4.9% from 5.1%. These readings seem to be helping Pound Sterling find a foothold.

The economic calendar will not offer any high-impact data releases from the US on Tuesday. Early Wednesday, the ONS will release September inflation data for the UK. Hence, investors could opt to wait until they see Consumer Price Index (CPI) figures before taking large positions.

Meanwhile, US stock index futures trade mixed in the European session. In case Wall Street's main indexes turn south after the opening bell, the USD could benefit from safe-haven flows and make it difficult for GBP/USD to extend its recovery.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays slightly above 50, reflecting a loss of bearish momentum in the near term. Looking north, first resistance could be spotted at 1.3100 (Fibonacci 78.6% retracement level of the latest uptrend) before 1.3170-1.3185 (Fibonacci 61.8% retracement, 200-period Simple Moving Average).

On the downside, 1.3050 (static level) aligns as interim support ahead of 1.3000 (round level, static level) and 1.2940 (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.

Author

Eren Sengezer

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.

More from Eren Sengezer
Share:

Editor's Picks

AUD/USD hangs close to monthly lows, still defends 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, defending 0.7100 while trading close to a monthly low in Wednesday's Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY holds firm above 155.00, awaits Fed policy announcements

USD/JPY climbs to a fresh one-week high above 155.00 in the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. The pair, however, remains below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold traders seem noncommittal below $4,350; eyes Fed rate decision

Gold clings to modest intraday gains through the first half of the European session, albeit it lacks follow-through buying and remains below $4,350. The US Dollar eases from a two-week high amid some profit-taking, offering support to the commodity. Traders, however, seem hesitant to place aggressive directional bets and opt to wait on the sidelines heading into the key central bank event risk.

Cardano's bearish breakout warns of a 15% downside risk
Cardano (ADA) hovers around $0.1900 at press time on Wednesday after a 6% decline the previous day, breaking below a crucial support level. Declining on-chain activity across the Cardano ecosystem, with reduced transaction count and Real Economic Value (REV), suggests waning user demand.
Fed decision in focus

Starting with the most important, the Fed decision. Heading into the event, data showed a rather punchy US August jobs report, which, you will likely recall, triggered a hawkish Fed rate repricing in rates markets. However, the recent US August CPI print mattered more.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.