- GBP/USD climbed above 1.3500 for the first time in over a week.
- The US dollar is continuing its retreat, which has increased demand for GBP.
- The PMI data is set to be released on Thursday, while trade and Fed news remain in focus.
On Tuesday, GBP/USD saw its second consecutive day of gains, primarily due to a weakening US dollar in the broader market. Investors are growing increasingly wary of Donald Trump’s ongoing focus on Federal Reserve Chairman Jerome Powell, raising concerns over the independence of the Fed and negatively impacting the dollar’s strength.
Trump’s efforts to replace Powell indicate a desire for a more accommodating Fed that may lower interest rates, especially amid ongoing trade tensions. However, his administration lacks the legal power to directly intervene in the Fed’s operations, which adds another layer of uncertainty to the situation.
As we move into Wednesday, market activity is likely to be influenced by the upcoming data, with a relative pause in significant announcements. Traders are anticipating Thursday, when PMI reports from both the UK and the US will be released. Slight improvements in both manufacturing and services sectors are expected across the Atlantic.
GBP/USD price forecast
The latest rise in GBP/USD suggests renewed bids will push the pair above the 1.3500 mark, which hasn’t happened in a week. The dollar’s current short-term weakness has benefitted the British pound, prompting a healthy technical rebound from the 1.3400 level.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) is known as the oldest currency in circulation, having been established in 886 AD. It ranks as the fourth-most traded currency globally, making up about 12% of forex transactions with a daily turnover of around $630 billion. The main trading pair is GBP/USD, often referred to as “cable,” which constitutes about 11% of the market.
The value of the pound is predominantly influenced by monetary policy from the Bank of England (BOE). The central bank’s primary aim is to maintain price stability, ideally around a 2% inflation rate. When inflation is high, the BOE may raise interest rates to slow it down, while low inflation might lead them to lower rates to promote borrowing and growth.
Economic indicators like GDP and employment data also impact the pound’s value. Strong economic performance tends to attract foreign investment and could lead the BOE to raise interest rates, which typically boosts GBP. Conversely, weak data can lead to depreciation.
Trade balance is another critical metric for the pound’s value. A favorable trade balance, reflecting strong exports, can elevate the currency as demand from foreign buyers increases. Conversely, a negative balance may weaken it.
