- GBP/USD ended its three-day winning streak on Thursday, dropping to 1.3500.
- Despite some positive momentum, the currency faces new challenges at critical technical points.
- The UK PMI figures fell short on Thursday, but Friday offers another chance for better UK data.
On Thursday, GBP/USD reversed a three-day bullish trend, declining from 1.3600 down to 1.3500. Recent PMI data from both the UK and the US created a divide in market sentiment, with the US service PMI exceeding expectations, while the UK’s figures for June came in disappointing.
As traders approach the final session of the week, there’s a sense of anticipation, particularly with expectations for UK retail sales to bounce back to 1.2% month-over-month in June, following a steep 2.7% drop in May.
Additionally, June durable goods orders from the US are on the agenda for Friday. Analysts are bracing for a significant drop, forecasting a -10.8% month-over-month decrease, contrasting with the prior strong increase of 16.4% in May.
GBP/USD Price Forecast
Recent gains for cable are under pressure, as GBP/USD has encountered resistance around the 1.3600 level. While various indicators like the rising trendline and moving averages provide some support, the short-term outlook remains uncertain as the price has retreated towards the 50-day EMA, which hovers around 1.3475.
GBP/USD Daily Chart
Pound Sterling FAQ
The Pound Sterling (GBP) is the world’s oldest currency, dating back to 886 AD, and functions as the official currency of Britain. As of 2022, it stands as the fourth most traded currency globally, responsible for about 12% of forex transactions, with an average daily trading volume of $630 billion. The primary trading pair is GBP/USD, often referred to as “cable,” making up about 11% of forex trades, along with GBP/JPY (“dragon,” 3%) and EUR/GBP (2%). The Bank of England (BOE) issues the Pound Sterling.
The primary factor impacting the value of the Pound is monetary policy dictated by the Bank of England. The BOE assesses whether it has achieved its main objective of maintaining “price stability,” targeting an inflation rate of around 2%. Its main strategy includes adjusting interest rates; if inflation is high, the BOE may raise rates to control it, which generally supports the GBP as it makes the UK more appealing to investors.
Economic health data also plays a significant role in the GBP’s performance. Indicators like GDP, and manufacturing and services PMIs can influence its direction. A strong economy tends to attract foreign investment and could lead to the BOE raising interest rates, which benefits the GBP. Conversely, if economic data is weak, the value of the Pound could fall.
Another crucial aspect for the Pound Sterling is the trade balance, which evaluates the difference between export revenue and import expenditures over a specified period. A healthy export market can strengthen the currency due to increased demand from foreign buyers, thus positively impacting the GBP if the trade balance is favorable.
