- The GBP/USD continued its decline on Monday, approaching the 1.3400 mark.
- The pound has dropped over 2.5% from its peak of 1.3788 in July.
- Upcoming inflation data for both the US and the UK is still anticipated.
The GBP/USD pair has seen a continuous drop, marking seven sessions of decline. It has now dipped below the 50-day exponential moving average for the first time since mid-April. Investors seem to be somewhat hesitant, likely due to mixed economic signals from the UK and the looming tariff threats from US President Donald Trump, which is bolstering the US dollar as a safe haven.
After another delay in Trump’s proposed tariffs, which many view as “unsellable”, a new potential deadline for broad tariffs has been informally set for August 1. Trump is also signaling possible double-digit tariff hikes against key trading partners, such as South Korea, Japan, Canada, and Mexico.
From Tuesday, the latest US inflation statistics are expected to be released, with the Consumer Price Index (CPI) showing an uptick through June. The UK will follow suit with its CPI data early Wednesday, where figures are predicted to hold steady at June levels.
GBP/USD price outlook
The recent decline in cable bids has pushed the pound to a new two-week low. Currently, the pair is testing the 50-day moving average for the first time in nearly three months, as it retreats from the multi-year highs reached in early July.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP), established in 886 AD, is the world’s oldest currency and serves as the official currency of Britain. As of 2022, it ranks as the fourth most traded currency in the forex market, accounting for 12% of transactions, with an average daily trade of $630 billion. Its primary trading pair, GBP/USD, also referred to as “cable”, represents 11% of forex activity, while GBP/JPY (“dragon”) accounts for 3%, and EUR/GBP for 2%. The currency is issued by the Bank of England (BOE).
The most significant factor influencing the value of the pound is the monetary policy set by the Bank of England. The BOE assesses whether it has achieved its goal of maintaining a stable inflation rate, aiming for around 2%. To control inflation, it adjusts interest rates. Increasing rates can help manage high inflation but might slow economic growth, while decreasing rates can stimulate growth but may lead to lower inflation.
Economic indicators can also affect the value of the pound. Data such as GDP, manufacturing and services PMI, and employment rates all play a role. A robust economy tends to attract foreign investment, potentially leading to interest rate hikes from the BOE and strengthening the pound. Conversely, weak economic data can have the opposite effect.
Another crucial metric is the trade balance, which compares a country’s exports to its imports over a period. A strong export sector can enhance currency value, as demand from foreign buyers grows. Thus, a positive net trade balance can strengthen the currency, while a negative balance may weaken it.
