GBP/USD runs out of bullish gas at key technical levels

GBP/USD briefly rose to a fresh 10-week high before receding.
Market sentiment improved enough to bolster the Cable despite light data.
Tariff threats have resumed from President Trump and now include Europe.

Joshua Gibson FXStreet

GBP/USD briefly tested a fresh 10-week high on Wednesday, piercing 1.2700 for the first time since mid-December. However, souring risk sentiment took hold during the US market session, dragging Cable back down into near-term consolidation and keeping the pair chained south of the 200-day Exponential Moving Average (EMA).

Always ready to seize an opportunity, President Trump issued fresh tariff threats on Wednesday, expanding his proposed import taxes to encompass a 25% tariff on European products. While specifics remain unclear, he revealed his plan to implement additional tariffs on European items, mentioning “cars and other things.” He also reiterated his stance that the US does not “need” Canadian crude oil or lumber, confirming that tariff packages of 25% on both Canada and Mexico are forthcoming. However, he once again postponed the timeline by announcing that the confirmed tariffs on Canada and Mexico will now be effective starting April 2nd.

Forex Today: Markets’ attention remains on US economy and tariffs

While the UK looks set to continue avoiding President Trump’s vengeful gaze, the circle of countries that the White House isn’t targeting with tariff threats is shrinking rapidly. If a full-blown trade war starts, the Pound Sterling could still see knock-on effects from global price increases.

UK data is notably limited this week, but there is plenty of US data for investors to chew on heading into the back half of the trading week. US Gross Domestic Product (GDP) growth figures for the fourth quarter of 2024 are due on Thursday, as well as an update to Durable Goods orders for January.

The key data print this week will be US Personal Consumption Expenditure (PCE) inflation due on Friday. US inflation metrics kicked higher at the start of 2025, and investors will be hoping for signs that a near-term flare up in inflation pressures will avoid trickling down to core inflation metrics.

GBP/USD price forecast

GBP/USD failed to chalk in a solid gain on Wednesday, pulling back from a new 10-week high and slumping back below the 200-day EMA at 1.2680. Bullish momentum has pinned Cable into the high end, but a near-term consolidation pattern is still baking into the technical chart. Technical oscillators have spent a worrying amount of time flashing overbought conditrions, and GBP/USD could be primed for a moderate pullback back below the 50-day EMA at 1.2532.

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

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.

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