- GBP/USD is expected to face resistance again on Wednesday at the 1.3300 level.
- The market momentum has hit a snag mid-week, leading to decreased volatility.
- Upcoming UK GDP growth data and US PPI inflation will be key points to watch on Thursday.
On Wednesday, GBP/USD retraced some of its recent gains, dipping back near the lower end of the 1.3300 range and entering a period of uneven, short-term consolidation ahead of significant data reports from both the UK and the US slated for Thursday.
Thursday kicks off with the first quarter UK GDP figures. The Q1 GDP is anticipated to show a quarter-on-quarter growth increase, with somewhat mixed expectations. However, as poor domestic economic activity continues to weigh down the outlook, the annual GDP forecast seems to have slightly improved. Q1 GDP is projected to rise from 0.1% to 0.6% quarter-on-quarter, while the annual GDP growth is expected to soften from 1.5% to 1.2% by Q4 2024.
Following that, attention will shift to the US Producer Price Index (PPI) inflation data. Core PPI inflation is expected to decrease from 3.3% to 3.1% year-on-year. Though this may help alleviate some inflationary concerns, there are growing worries about the effects of tariffs on the market.
GBP/USD price forecast
As Thursday unfolds, GBP/USD continues to struggle, stalling near the critical 1.3300 level. Recently, price action has been turbulent since it fell from a high close to 1.3450, and bearish momentum is finding it difficult to push bids back toward the 50-day exponential moving average of about 1.3100.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP), the oldest currency globally since 886 AD, serves as the official currency of Britain. As of 2022, it ranks as the fourth most traded currency, making up about 12% of all forex transactions, averaging $630 billion daily. Its primary trading pair is GBP/USD or “cable,” which accounts for 11% of forex trading.
The most significant influence on the pound’s value comes from the monetary policy set by the Bank of England. The BOE aims for price stability, typically around a 2% inflation rate. To achieve this, it adjusts interest rates. High inflation may prompt the BOE to raise rates, which can bolster GBP by attracting foreign investment. Conversely, if inflation is too low, the BOE might reduce rates to stimulate growth.
Economic health indicators—like GDP, manufacturing and services PMI, and employment figures—can also sway the value of the pound. A robust economy tends to attract foreign investment, potentially leading to higher interest rates from the BOE, thereby strengthening GBP. Conversely, weak economic data may cause the pound to fall.
The trade balance is another crucial metric for the Pound Sterling. This calculates the difference between a country’s export earnings and import expenses. A favorable trade balance strengthens the currency as foreign demand for exports increases. Therefore, high export performance tends to bolster the pound, while a negative balance can weaken it.
