GBP/USD keeps rising as optimism over trade deals drives down the dollar.

GBP/USD Performance and Outlook

GBP/USD has seen gains for three consecutive days, nearing the 1.3600 mark.

Anticipation for a last-minute trade deal to avoid high tariffs is boosting investor confidence.

The US Dollar is experiencing renewed pressure as traders react to tariff negotiations.

On Wednesday, GBP/USD moved upward, achieving solid profits for the third day in a row, inching closer to the 1.3600 level. The US Dollar (USD) is under pressure due to widespread expectations for a potential trade agreement between the Trump administration and other parties ahead of the August 1 tariff deadline. This has led to a decline in the dollar’s strength across the foreign exchange market, allowing Sterling (GBP) to gain momentum.

The United States has reached a temporary trade agreement with Japan, but it seems the Trump administration may complicate matters for foreign firms based in Japan, making it challenging for them to relocate their production to the US. While there are whispers of a possible trade deal with the European Union (EU), key Trump administration officials have dismissed these speculations, adding to the uncertainty.

Market participants are awaiting the release of the Purchasing Manager Index (PMI) figures for both the UK and the US on Thursday, with expectations of strong data in June for both manufacturing and services.

GBP/USD Price Forecast

GBP/USD is showing a solid upward trend, but it needs to break through the 20-day Simple Moving Average (SMA) at 1.3564. The momentum suggests that buyers are gaining strength, as indicated by the relative strength index (RSI).

If buyers can push GBP/USD past the 20-day SMA, the next target will likely be the 1.3600 level. Should that level be breached, it could open the way to 1.3650, followed by 1.3700. On the other hand, if GBP/USD drops to 1.3520 and falls below the 50-day SMA, the next support would be around 1.3500. Additionally, there’s a demand level below at 1.3402, which has been tested daily since July 21st.

Pound Sterling FAQ

Pound Sterling (GBP) is the oldest currency still in use today, originating in 886 AD, 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 turnover of $630 billion. The main trading pair is GBP/USD, known colloquially as “cable,” which makes up 11% of forex trading, along with GBP/JPY, referred to as “dragon” (3%), and EUR/GBP (2%). The Bank of England (BOE) issues Pound Sterling.

The primary influence on the value of GBP is monetary policy dictated by the BOE. This central bank focuses on achieving “price stability,” generally targeting an inflation rate of around 2%. If inflation rises, the BOE tends to increase interest rates to discourage excessive borrowing, which can be beneficial for GBP. Conversely, if inflation is too low, indications of slowed economic growth may prompt the BOE to lower rates to encourage borrowing and investment.

Various economic indicators also play a significant role in influencing GBP’s value. Data points such as GDP, PMI for manufacturing and services, and employment statistics can all steer the currency’s direction. A robust economy tends to attract foreign investment and may lead to a rise in interest rates, positively impacting GBP. Weak economic data, however, can result in a decline in the currency’s value.

Another crucial metric for Pound Sterling is the trade balance, which reflects the difference between exports and imports. A country with popular exports usually benefits from increased foreign demand, thereby strengthening its currency. Conversely, a negative trade balance could weaken the currency.