GBP/USD Price Forecast: First upside barrier emerges above 1.3600

GBP/USD drifts higher to around 1.3520 in Monday’s early European session.
Positive view of the pair prevails above the 100-day EMA, with a bullish RSI indicator.
The immediate resistance level emerges in the 1.3600-1.3605 region; the first support level to watch is 1.3405.

Lallalit Srijandorn FXStreet

The GBP/USD pair edges higher to near 1.3520 during the early European session on Monday. The growing prospect that the Federal Reserve (Fed) will lower borrowing costs at least twice by the end of this year undermines the US Dollar (USD) against the Pound Sterling (GBP).

Technically, the constructive outlook of GBP/USD remains in play, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is reinforced by the 14-day Relative Strength Index (RSI) that stands above the midline. This displays the bullish momentum in the near term.

The first upside barrier emerges in the 1.3600-1.3605 zone, representing the psychological level and the upper boundary of the Bollinger Band. A decisive break above this level could pick up more momentum and aim for 1.3632, the high of June 13. Further north, the next resistance level is seen at 1.3770, the high of June 26.

On the downside, the low of August 21 at 1.3405 acts as an initial support level for GBP/USD. A breach of this level could drag the major pair toward 1.3372, the 100-day EMA. Extended losses could see a drop to 1.3345, the lower limit of the Bollinger Band.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.