GBP/USD rallies on Tuesday, taps fresh yearly high

GBP/USD pressed into a new 13-month high on Tuesday.
Pound Sterling continues to rally on broad-market Greenback weakness.
Markets are tilting toward Thursday’s Jackson Hole Economic Symposium kickoff.

Joshua Gibson FXStreet

GBP/USD chalked in another third of a percent gain on Tuesday, squeezing out a fresh 13-month high and closing in the green for a third straight day as the Pound Sterling capitalizes on broad-market Greenback weakness. Market sentiment is holding on the high end ahead of key business activity survey results, and the upcoming kickoff of the Jackson Hole Economic Symposium.

Wednesday will give markets another opportunity to take a breather before high impact data gets underway in the back half of the trading week. UK Purchasing Managers Index (PMI) figures for August are expected to drift upwards slightly, with the UK Services PMI component forecast to tick up to 52.8 from 52.5. The Manufacturing section is expected to hold steady at 52.1.

US PMI business activity survey results are slated for release on Thursday, as well as the kickoff of the annual Jackson Hole Symposium which is set to run through the weekend. Wednesday will deliver the Federal Reserve’s (Fed) latest Meeting Minutes, but market forces will broadly be looking ahead to Thursday’s outings for reasons to move.

US S&P Global Manufacturing PMI activity expectations are forecast to hold steady at 49.6 in August, while the Services PMI component is expected to tick down a full point to 54.0 from 55.0. The kickoff of the Jackson Hole Symposium is expected to draw plenty of investor attention on Thursday, but Friday’s appearance from Fed Chairman Jerome Powell can be expected to set the overall tone of market sentiment heading into next week.

GBP/USD price forecast

Cable continues to grind its way higher with price action tapping a fresh 13-month peak bid just above 1.3050 on Tuesday. The pair has closed in the green for all but one of the last nine straight trading days.

However, failure by bulls to push even further beyond current levels could see a short pressure trap build as a double-top forms on daily candlesticks, and an overextended bullish push is looking at a long way to drop before running into the nearest technical barrier at the 50-day Exponential Moving Average (EMA) near 1.2806.

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, aka ‘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

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD edges above 1.1750 due to ECB-Fed policy divergence

EUR/USD has recovered its recent losses registered in the previous session, trading around 1.1760 during the Asian hours on Friday. Traders will likely observe Germany’s Manufacturing Purchasing Managers’ Index data later in the day.

GBP/USD gathers strength above 1.3450 on Fed rate cut bets, BoE's gradual policy path

The GBP/USD pair gathers strength to around 1.3480 during the early Asian session on Friday. Expectations of the US Federal Reserve rate cuts this year weigh on the US Dollar against the Pound Sterling. Philadelphia Fed President Anna Paulson is set to speak later on the weekend.

Gold climbs to near $4,350 on Fed rate cut bets, geopolitical risks

Gold price rises to near $4,345 during the early Asian session on Friday. Gold finished 2025 with a significant rally, achieving an annual gain of around 65%, its biggest annual gain since 1979. The rally of the precious metal is bolstered by the prospect of further US interest rate cuts in 2026 and safe-haven flows.

Bitcoin, Ethereum and Ripple enter the New Year with breakout hopes

Bitcoin, Ethereum, and Ripple entered the new year trading at key technical levels on Friday, as traders seek fresh directional cues in January. With BTC locked in a tight range, ETH is approaching its 50-day Exponential Moving Average, while XRP is nearing resistance. A clear breakout across these top three cryptocurrencies could help define market momentum in the opening weeks of the year.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is. Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).