- GBP/USD increased by 0.3% on Monday, buoyed by a generally optimistic market sentiment.
- Market sentiment seems to be leaning toward risk-taking ahead of a week packed with data.
- Major US non-farm payroll data is set to be released this week.
On Monday, GBP/USD opened strong, stepping into a new trading week with a positive stance. It has risen about 0.3%, even without significant data or news influencing the markets. This upward trend comes as investors anticipate potential interest rate cuts from the Federal Reserve this month.
Tuesday will feature important US economic data, while the UK’s market will also have notable figures. The US manufacturing data for August is expected to show a slight uptick from 48.0 to 49.0 during the US trading hours. However, it’s worth noting that the response rates for PMI surveys tend to be low, making the final numbers less reliable. Still, investors will keep a close eye on the outcomes.
This Friday, the non-farm payroll (NFP) report will be pivotal for market movements this week. The Federal Reserve is leaning towards interest rate cuts on September 17, focusing on encouraging job growth while managing inflation. Investors are somewhat hopeful that easing worker numbers in the US might alleviate rising inflation and help support jobs, which have been notably impacted this year.
GBP/USD price forecast
The bullish trend in GBP/USD has pushed the pair up approximately 1.2% from its recent low near 1.3390. It appears to be gearing up for a challenge around the 1.3600 mark. The pair has remained in positive territory for most of the last seven trading sessions, showing stability since early August.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) holds the title of being the oldest currency still in use, dating back to 886 AD. As of 2022, it ranks as the fourth most traded currency globally, comprising around 12% of forex transactions, with an average daily trading volume of $630 billion. Its primary trading pair is GBP/USD, known colloquially as “cable,” which represents about 11% of forex transactions.
The value of the pound is mainly influenced by the monetary policies of the Bank of England, which focuses on maintaining price stability with an inflation target of around 2%. To regulate inflation, the Bank may raise interest rates, making borrowing more expensive, which typically strengthens the pound. Conversely, if inflation is low and economic growth stagnates, the Bank might lower interest rates to encourage borrowing and investment.
Economic data, such as GDP, manufacturing and services PMI, and employment figures, plays a crucial role in assessing the health of the economy and can subsequently impact the pound’s value. A robust economy usually supports the pound, as it attracts foreign investment and may prompt the Bank of England to increase interest rates, which bodes well for the currency.
Another significant factor influencing the pound is the trade balance, which measures the difference between exports and imports over a defined period. A strong export sector generally boosts the currency as it attracts demand from foreign buyers, strengthening the pound, while a negative balance can have the opposite effect.
