- GBP/USD experienced a modest rebound, crossing above the 1.3450 mark on Thursday.
- Even though the US dollar showed strength recently due to geopolitical issues, the market paused during the mid-US holiday session.
- Ongoing tensions between Israel and Iran are escalating, prompting the Trump administration to consider direct engagement.
On Thursday, GBP/USD found some upward momentum, bouncing back from about 1.3400 and breaking through the 1.3450 barrier. Despite the looming geopolitical tensions impacting the dollar’s strength, National holidays in the US led to a quieter market session, allowing some room for the dollar to ease.
A CBS report indicated President Trump might be contemplating a military order aimed at Iranian nuclear facilities. If this goes ahead, it would mark the first military preemptive action since the 2003 Iraq invasion. According to Israeli officials, a decision from the Trump administration is expected within the next day or two.
Reports from three diplomats suggest consistent communication between the US administration, particularly special envoys, and Iranian officials. This contact seems to have eased some market tensions. Iranian Foreign Minister Abbas Araghi reportedly conveyed to US Envoy Witkov that Iran is willing to be “flexible” regarding its nuclear program, but this is contingent on Israel halting its missile strikes. Araghi is set to visit Geneva on Friday to meet with European counterparts.
Retail sales figures from the UK, due on Friday for May, are anticipated to show a decline, with predictions of a 0.5% decrease following a 1.2% rise in April.
GBP/USD price forecast
Thin trading volume for the dollar on Thursday allowed GBP/USD to climb, moving from the 1.3400 level upwards. The currency pair remains above the 50-day EMA, situated close to 1.3355, with long-term bullish momentum still favoring a robust floor determined by rising trendlines.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) holds the title of the world’s oldest currency (dating back to 886 AD) and serves as the official currency of Britain. In 2022, it ranked as the fourth most traded forex globally, involved in 12% of all transactions, with a daily average of $630 billion. Its primary pairing, GBP/USD, known as “cable,” constitutes 11% of foreign exchange activities, with GBP/JPY or “dragon” at 3%, and EUR/GBP at 2%. The currency is issued by the Bank of England (BOE).
The most significant factor affecting the value of the pound is the monetary policy established by the Bank of England. The BOE’s main goal is achieving “price stability,” typically represented by a stable inflation rate of around 2%. Their primary tool is interest rate adjustments—raising rates to cool inflation, which generally supports GBP by making the UK attractive to investors. Conversely, if inflation is low, the BOE may lower rates to stimulate borrowing and growth.
Economic health indicators, such as GDP, manufacturing and services PMI, and employment rates can impact the pound’s value. A robust economy usually bodes well for the sterling, attracting foreign investment and potentially leading to BOE interest rate hikes that can strengthen GBP. Weak economic data can have the opposite effect, dragging down the pound.
Another crucial indicator for Pound Sterling is the trade balance, reflecting the difference between a country’s export revenues and import expenditures. A favorable trade balance, stemming from strong exports, tends to strengthen the currency, while a negative balance may weaken it.
