GBP/USD Price Forecast: Flat lines near 1.3500 as bulls shrug off UK GDP ahead of US CPI

GBP/USD struggles to capitalize on the upbeat UK GDP-led modest intraday uptick.
Rising Fed rate hike bets and geopolitical risks support the USD, capping spot prices.
The technical setup warrants some caution for bulls ahead of the key US CPI report.

Haresh Menghani FXStreet

The GBP/USD pair struggles to capitalize on its modest intraday gains and trades near the 1.3500 psychological mark during the first half of the European session on Friday. Spot prices, however, hold above the weekly low as traders await the release of the latest US consumer inflation figures before placing fresh directional bets.

The British Pound (GBP) gets a minor lift following the release of the better-than-expected monthly UK GDP report, showing that the economy expanded at a pace of 0.4% in July, compared to consensus estimates for a flat reading. The immediate market reaction, however, turns out to be short-lived as rising bets for an imminent rate hike by the US Federal Reserve (Fed), bolstered by the US Producer Price Index (PPI) on Thursday, act as a tailwind for the US Dollar (USD). Furthermore, persistent geopolitical uncertainties underpin the safe-haven buck and contribute to capping the currency pair.

From a technical perspective, the GBP/USD pair currently holds just beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart, at 1.3518, which keeps the near-term tone mildly bearish despite spot prices hovering close to recent highs. The 38.2% Fibonacci retracement of the latest swing, at 1.3522, reinforces this nearby resistance zone, while the Relative Strength Index (RSI) around 42 and a slightly negative Moving Average Convergence Divergence (MACD) histogram hint that the upside momentum is starting to fade rather than accelerating.

Meanwhile, immediate resistance is clustered between the 200-period SMA at 1.3518 and the 38.2% Fibo. retracement at 1.3522, with the 23.6% retracement higher up at 1.3580 acting as the next barrier if buyers regain control. On the downside, initial support is seen at the 50.0% retracement near 1.3475, followed by the 61.8% Fibo. at 1.3428, while deeper pullbacks could expose the 78.6% level at 1.3361 and the prior swing floor around 1.3276.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

GBP/USD 4-hour 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

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

AUD/USD keeps range near mid-0.7100s as USD bulls await US CPI

AUD/USD steadies near mid-0.7100s in the Asian session on Friday, stalling the previous day's sharp decline to an over one-week low. The August PPI report reaffirmed Fed rate-hike bets and boosted the US Dollar on Thursday, which weighed heavily on the pair. However, hawkish RBA expectations limited losses for the Aussie as USD bulls now await the release of the US consumer inflation figures before placing fresh bets.

USD/JPY holds lower ground toward 154.00; looks to US CPI

USD/JPY holds lower ground toward 154.00 in the Asian session on Friday after hot Japanese PPI data bolster a more hawkish BoJ repricing and provide fresh impetus to the Japanese Yen. However, the downside appears capped as the US Dollar preserves overnight gains ahead of the latest US consumer inflation data.

Gold moves away from one-week low, climbs above $4,450 as USD edges lower ahead of CPI

Gold builds on its modest intraday recovery from the $4,300 neighborhood, or a one-and-a-half-week low, touched earlier this Friday, and climbs above $4,350 heading into the European session. The upside potential, however, seems limited as traders opt to wait for the release of US consumer inflation figures before placing directional bets.

Cardano approaches critical support as correction risks grow

Cardano (ADA) recovers slightly, trading at $0.206 at the time of writing on Friday, inches above the critical support zone after losing more than 6% so far this week. Weakening derivatives data and fading bullish momentum suggest a bearish near-term outlook, with a decisive close below the support zone potentially triggering a deeper correction for ADA.

US core CPI data set to ease in August as markets reprice Fed September rate decision

The US Bureau of Labor Statistics will publish the August Consumer Price Index data on Friday. The report is expected to show a small decline in annual core inflation. Any divergence from analysts’ estimates could influence the Federal Reserve’s policy outlook and impact the US Dollar’s valuation.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.