GBP/USD snaps six-day losing streak as next Fed rate call looms

GBP/USD catches a bullish wind for the first time in over a week.
Despite a near-term reversal, momentum is unlike to sustain through the week.
The Fed’s latest interest rate decision is due on Wednesday, markets broadly expect a rate cut.

Joshua Gibson FXStreet

GBP/USD caught a thin bounce off the 1.3300 handle on Monday, chalking in the pair’s first bullish candle in six straight trading session and keeping Cable bids just north of the 200-day Exponential Moving Average (EMA).

Despite a last-minute pullup to close off a bearish slide, near-term momentum is unlikely to result in any significant changes with a looming Federal Reserve (Fed) interest rate decision.

The Fed’s upcoming rate call, due on Wednesday, is broadly expected to be another quarter-point interest rate cut. After months of kicking the can, the Fed finally kicked off a fresh interest rate-cutting schedule at its previous meeting, and markets are firmly convinced the Fed will deliver a second straight cut this week. The key notes from this week’s Fed rate decision will be how likely the Fed sounds like it will deliver a third straight rate cut in December.

GBP/USD price forecast

GBP/USD continues to trade under pressure, holding below the 50-day EMA at 1.3428 while finding near-term support around the 200-day EMA at 1.3278. The pair has shown limited follow-through after a small rebound from last week’s 1.3250 low, keeping the broader downtrend intact.

Momentum remains weak, with sellers defending each push toward 1.3400. A clear move below 1.3250 would expose the 1.3150 area, while recovery above 1.3450 would be needed to shift the near-term outlook.

RSI near 43 signals muted momentum with room for either direction. Until price breaks out of this tight range, trading is likely to stay choppy.

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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