On Thursday, the British pound (GBP) gained 0.22% against the US dollar (USD), despite data showing that the US economy outpaced previous growth estimates for the first quarter. The GBP/USD pair traded at 1.3194, bouncing back from a low of 1.3151 earlier in the day.
GBP/USD rises as profit-taking temper strong US economic data
The core personal consumption expenditures (PCE) price index, which the Federal Reserve closely monitors, rose to 3.4% year-on-year from 3.3% in April, as anticipated. The US dollar, however, remained unchanged, indicating that further tightening might be necessary. The US Dollar Index (DXY), which assesses the dollar’s strength against six other currencies, dipped by 0.17% to 101.41.
Treasury yields in the US also saw a decline, with the 10-year T-note yield falling 2 basis points to 4.378%. GDP growth for the first quarter of 2026 came in at 2.1%, exceeding expectations and the earlier 1.6% estimate. Jobless claims for the week ending June 20 dropped to 215,000 from an expected 227,000. Meanwhile, durable goods orders for May fell by 4.5%, as projected, following an 8% increase the previous month.
These figures would typically bolster the dollar, but it seems traders are cashing out as market sentiment shifts towards a softer outlook for the Fed’s policies in 2026.
Traders are forecasting at least 30 basis points (bps) of easing by year-end, a drop from the near 40 basis points anticipated on June 22, according to data from Prime Terminal.
In the UK, notable political changes occurred as Prime Minister Keir Starmer resigned, setting the stage for Andy Burnham to take on the role. Observers suggest Mr. Burnham may not retain Rachel Reeves as prime minister, leading to speculation about his potential appointees.
Last year, Mr. Burnham expressed concerns over Britain’s reliance on foreign financing, which raised worries about his future role as Prime Minister.
Mark Dowding, chief investment officer at RBC BlueBay, voiced that Mr. Burnham’s fixation on the country’s precarious financial situation might create pressures if ignored.
On a separate note, an agreement between the US and Iran has contributed to lowering oil prices and eased inflationary concerns. The Bank of England is anticipated to maintain current interest rates in its July meeting, even as traders have been factoring in potential rate increases through December.
GBP/USD Price Prediction: Technical Outlook
Currently, GBP/USD is trading at 1.3207. The pair remains under pressure, significantly below the 50-day, 100-day, and 200-day simple moving averages (SMAs) clustered around 1.3437, with a bearish undertone following the breakdown of the prior uptrend support near 1.3451. The Relative Strength Index (14) is still in bearish territory but above oversold conditions at about 36. This indicates that while sellers are in control, there’s potential for further declines before a reversal occurs.
On the upside, the SMA cluster at 1.3437 acts as the first key resistance level, followed by a descending trendline that last came into play around 1.3537, where previous market actions indicated fresh supply. On the downside, early demand is anticipated near the inception of the former uptrend line at 1.3159, relative to the recent low at 1.3167. A decisive move below this range could lead to greater losses, whereas breaking above it might still reflect consolidation within a bearish daily context.
Frequently asked questions about the British pound
Pound Sterling (GBP) is recognized as the world’s oldest currency, dating back to 886 AD, and serves as the official currency of the United Kingdom. Data from 2022 indicates that it ranks fourth in global foreign exchange (FX) trade volume, responsible for about 12% of all trades, averaging around $630 billion daily. The primary trading pairs include GBP/USD, known colloquially as the “cable,” which constitutes 11% of FX trading, as well as GBP/JPY (3%), referred to as the “dragon,” and EUR/GBP (2%). The Bank of England (BoE) issues Sterling.
Monetary policy, determined by the Bank of England, is the most crucial factor influencing the value of the British pound. The Bank’s decisions are predicated on achieving its primary aim of “price stability,” corresponding to a stable inflation rate of around 2%. Adjusting interest rates serves as the main tool for fulfilling this objective. When inflation rises excessively, the BoE raises rates to control it, making borrowing more expensive for individuals and businesses, which generally strengthens the pound. Conversely, if inflation dips too low, indicating slowed economic growth, the BoE may lower interest rates to stimulate borrowing for growth-oriented investments.
Economic data releases play a significant role in assessing the pound’s value. Indicators such as GDP growth, manufacturing and services PMI, and employment statistics can heavily influence GBP’s trajectory. A robust economy boosts the pound’s appeal, drawing in more foreign investment and potentially prompting the BoE to raise interest rates, directly impacting the pound’s strength. However, weak economic signals can lead to pound depreciation.
The trade balance is another key indicator related to the British pound. It measures the difference between a country’s export earnings and its import expenditures over time. High demand for a country’s export goods tends to strengthen its currency as foreign buyers seek these products. Thus, a positive net trade balance enhances the currency, whereas a negative balance can weaken it.
