GBP/USD sheds weight amid thin Thursday ahead of key US data

GBP/USD lost around 0.2% on Thursday as Cable traders await meaningful news.
US data came in mixed on Thursday; traders await Friday’s US PCEPI print.
A data-light week for the UK leaves the Pound adrift.

Joshua Gibson FXStreet

GBP/USD soured slightly on Thursday, shedding a scant one-fifth of one percent as markets grapple with mixed headwinds and keep risk appetite underbid. US President Donald Trump reiterated threats to impose stiff tariffs on Canada and Mexico as soon as February 1, with fresh threats in the pipe for import fees on Chinese goods and Crude Oil products.

US economic data came in mixed on Thursday, further flummoxing markets. US Gross Domestic Product (GDP) growth in the fourth quarter of 2024 came in below expectations, but weekly Initial Jobless Claims figures beat expectations while remaining well within recent norms.

US PCE inflation to be the key post-Fed data print

Coming up on Friday, US Personal Consumption Expenditure Price Index (PCEPI) inflation metrics will print during the US market session. As the Federal Reserve’s (Fed) favored method of measuring and tracking consumer-level inflation, this PCEPI print will likely draw more eyes than usual after the Fed boldly held interest rates steady earlier this week, despite President Trump’s vehement protestations.

GBP/USD price forecast

GBP/USD continues to grind lower amid half-hearted intraday momentum. The pair caught a clean bearish technical bounce from the 50-day Exponential Moving Average (EMA) early this week, and has continued to flub a recent bullish upswing from multi-month lows chalked in near 1.2100 earlier in January.

Momentum is still pointed toward the low side, and Cable is poised for a pullback to the 1.2250 region unless bidders return to the fold and push bids back above the 1.2500 handle and the 50-day EMA.

GBP/USD price forecast

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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