GBP/USD experienced a decline of approximately 0.7% on Tuesday, dropping from a previous high near 1.3650 and approaching the significant level of 1.3500 before slightly bouncing back later in the day. The pair stayed at the lower end of its recent range, with prices recovering to around 1.3540 before steadily decreasing throughout both European and US trading sessions.
On the political front, instability in Westminster escalated as over 70 Labour MPs publicly urged Prime Minister Keir Starmer to resign following substantial losses in local elections. This uncertainty about leadership changes triggered concerns over potentially looser fiscal policies, leading to a sell-off in UK government bonds, with the yield on the 30-year bond reaching 5.81%, the highest since 1998. Attention will shift to Bank of England’s Katherine Mann on Wednesday, who is known for her hawkish stance. He indicated readiness to vote for a rate hike if inflation expectations remain elevated into 2027. Following that, Thursday will see the release of preliminary first-quarter UK GDP data amid expectations that inflation driven by energy costs could exceed 5% this year, reflecting a 0.6% increase versus the prior quarter.
Meanwhile, on the US dollar side, April’s consumer price index (CPI) data was favorable, with year-over-year headline CPI at 3.8% and core CPI at 2.8%, both surpassing forecasts. Core CPI grew by 0.4% month-on-month, driven by rising costs in shelter and energy, partly influenced by the closure of the Strait of Hormuz and increasing Brent oil prices. This announcement contributed to a broad strengthening of the dollar against major currencies. The Producer Price Index (PPI) data set for release on Wednesday will provide further insight into wholesale price dynamics, while retail sales and weekly unemployment claims are expected on Thursday.
GBP/USD 15 minute chart
Currently, on the 15-minute chart, GBP/USD is trading at 1.3540, showing a bearish trend throughout the day after falling below the opening price of 1.3608. It’s now encountering overhead resistance. The Stochastic RSI indicates an overbought condition at around 92, hinting that the recent pullback may be losing strength, which could hinder further upward movement while trading below the opening level.
On the upside, initial resistance is found near the day’s open around 1.3608. A consistent break above this level would need to occur to shift the current downward bias and support a more significant recovery. With a lack of clear support levels nearby based on moving averages or other indicators, traders might look at intra-day price movements and prior session lows to gauge potential demand areas if selling reemerges.
In terms of the daily chart, GBP/USD remains above its 50-day and 200-day exponential moving averages (EMAs) at 1.3482 and 1.3380, respectively, displaying a moderately bullish outlook in the short term. This recent recovery is linked to the supportive moving average structure, even as the stochastic RSI gradually approaches a neutral midpoint around 50, indicating that short-term upward momentum is picking up pace, although not rapidly.
The first technical reference point on the upside is the 50-day EMA at 1.3482, acting as a crucial dynamic support level that upholds the positive tone as long as the price stays above it. A deeper retracement towards the 200-day EMA at 1.3380 would not undermine the overall recovery structure. Only a consistent drop below this long-term average would suggest a significant loss of bullish momentum.
(The technical analysis in this story utilized AI tools.)
Frequently asked questions about the British pound
Pound Sterling (GBP) holds the title of the world’s oldest currency, dating back to 886 AD, and serves as the official currency for the United Kingdom. As of 2022, it ranks fourth globally in foreign exchange (FX) trade volume, accounting for 12% of all trades, with an average daily volume of $630 billion. Key trading pairs include GBP/USD—often referred to as the “cable”—which represents 11% of FX transactions, along with GBP/JPY (3%, known as the “dragon”) and EUR/GBP (2%). The Bank of England (BoE) is responsible for issuing Sterling.
The most significant factor affecting the British pound’s value is monetary policy set by the Bank of England. The BoE’s decisions primarily revolve around achieving its goal of “price stability,” targeting an inflation rate of around 2%. Interest rate adjustments serve as the main tool for this purpose. If inflation climbs too high, the BoE typically responds by raising interest rates, making borrowing more expensive which is generally seen as a positive for the pound, as higher rates attract global investment. In contrast, when inflation falls too low, it may signal a slowdown in economic growth, prompting the BoE to lower rates to encourage borrowing.
Various economic indicators also impact the pound’s value. GDP, manufacturing and services PMIs, and employment figures are key metrics that can sway GBP direction. A strong economy tends to support the pound as it attracts foreign investment, potentially leading to rate hikes by the BoE, further strengthening the currency. Conversely, weak economic indicators might lead to a depreciation of the pound.
The trade balance is another critical metric for the British pound, measuring the difference between earnings from exports and expenditures on imports. If a country has sought-after export goods, demand from foreign buyers can strengthen its currency. Therefore, a positive trade balance typically supports currency appreciation, while a negative balance may lead to currency weakness.
