- GBP/USD experienced significant volatility on Wednesday, breaking an eight-day losing streak.
- Political tension surrounding Trump, aimed at Powell, boosted the Greenback.
- US PPI inflation eased in June, reducing inflation concerns.
On Wednesday, GBP/USD saw gains, ending its streak of losses as buyers stepped in to halt further declines. The Greenback faced pressure following President Trump’s intensified criticism of Federal Reserve Chairman Jerome Powell, raising concerns among investors about the Fed’s autonomy.
Meanwhile, inflation in the UK’s Consumer Price Index (CPI) showed an uptick, complicating the Bank of England’s (BOE) ability to lower interest rates, which, in turn, gave strength to the pound.
Trump made a somewhat ambiguous statement about not taking action against Powell, but his presentation of a written dismissal letter before Congress indicated a desire to remove Powell from his position.
As traders in the cable market look forward to new UK labor data on Thursday, they’ll also be keeping an eye on US retail sales. The trading week is set to end with significant US Consumer Sentiment Survey results on Friday.
GBP/USD price forecast
A slight recovery on Wednesday interrupted a continuous decline after GBP/USD fell from multi-year highs earlier in July. The pair is expected to test a technical bounce from the 1.3400 mark, provided that buyer momentum persists.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) is known as the world’s oldest currency, dating back to 886 AD, and serves as Britain’s official currency. In 2022, it was the fourth most traded currency globally, comprising 12% of all forex transactions and averaging about $630 billion daily. The primary trading pair is GBP/USD, commonly referred to as “cable,” which makes up 11% of forex volume.
The primary driver of GBP’s value is the monetary policy set by the Bank of England. Their main goal is to achieve “price stability,” targeting an inflation rate of around 2%. To manage this, they adjust interest rates. A rise in inflation typically leads to higher rates, which can make the UK more appealing for investors. Conversely, if inflation is low, the BOE may consider cutting rates to stimulate growth.
Economic indicators like GDP, manufacturing and services PMI, and employment stats also play a role in assessing the pound’s value. A robust economy is beneficial for the pound, attracting foreign investment and prompting the BOE to potentially raise interest rates.
Trade balance is another crucial metric for Pound Sterling. It measures the difference between exports and imports. A favorable trade balance can strengthen the currency as increased foreign demand for exports boosts its value, while a negative balance can have the opposite effect.
