- GBP/USD exceeded 1.3660 for the first time in over 40 months on Wednesday.
- The pound’s strength is being supported by dollar sales in the market.
- Insights from central bank officials are emerging as GDP updates approach.
GBP/USD has strengthened as the US dollar fluctuates, marking its highest position in four and a half years for the third consecutive day in this current year. Policymakers from both the Bank of England (BOE) and the Federal Reserve (Fed) are set to make appearances in the first half of the week, with this trend likely to persist throughout the day.
On Wednesday, Fed Chairman Jerome Powell presented two days of testimony before congressional committees, adhering to the familiar Fed narrative and emphasizing their stance multiple times. There’s considerable uncertainty surrounding the economic situation under the Trump administration, leading the Fed to hold off on interest rate adjustments until the ramifications of the tariffs implemented by Trump are fully understood.
Bank of England Governor Andrew Bailey is scheduled to speak publicly on Thursday during the British Chamber of Commerce annual meeting titled “Where’s The Growth?” The UK’s GDP growth figures are anticipated on Friday, with an expected quarterly growth rate of 0.7% for the first quarter.
US GDP data is set to be released on Thursday, prior to the UK figures. The forecast for the annual US GDP is expected to stabilize at -0.2% QOQ as the economy prepares for potential slowdowns ahead.
GBP/USD Price Forecast
The GBP/USD pair reached a new 41-month peak on Wednesday, surpassing 1.3660 for the first time since January 2022. The pair may be on track for a positive trajectory over the past five months as the dollar weakens across the board.
However, traders might be getting a bit too optimistic. The surge in GBP/USD prices is advancing well beyond recent trendlines, with current price actions significantly surpassing the 200-day exponential moving average around 1.3020. The technical indicators show signs of being overbought, suggesting that pullbacks could be on the horizon.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP), established in 886 AD, is the oldest currency still in use today and serves as the official currency of Britain. As of 2022, it ranks as the fourth most traded currency, making up about 12% of global transactions, with an average daily turnover of $630 billion. Its main trading pair is GBP/USD, often referred to as “cable”. Other notable pairs include GBP/JPY (“dragon”) and EUR/GBP.
The primary factor influencing the pound’s value is the monetary policy set by the Bank of England. The BOE focuses on achieving “price stability,” typically defined as maintaining an inflation rate around 2%. Adjustments to interest rates are the primary means of achieving this stability. If inflation rises too high, the BOE may increase rates to curb spending, making the UK more appealing to global investors. Conversely, if inflation is too low and growth stagnates, they might lower rates to encourage borrowing and investment.
Economic data is essential in assessing the pound’s health, with indicators like GDP, manufacturing, and service PMIs, as well as employment stats affecting its trajectory. Strong economic performance typically bolsters the pound by attracting foreign capital and possibly prompting the BOE to raise interest rates, positively influencing GBP values. Weak economic data can, however, have the opposite effect.
Another critical indicator for Pound Sterling is the trade balance, reflecting the difference between exports and imports. A country with popular exports is likely to see a stronger currency, as foreign demand for these goods increases. Therefore, a positive trade balance supports a stronger pound, while a negative balance may weaken it.
