GBP/USD Price Forecast: Broader trend remains sideways amid Triangle formation
- GBP/USD trades marginally lower at around 1.3440 as the US Dollar edges higher.
- Investors await US President Trump’s approval of the US-Iran 60-day MoU.
- 10-year UK gilt yields extend their decline to near 4.81%.
The GBP/USD pair trades subduedly at around 1.3440 during the early European trading session on Friday. The Cable is marginally under pressure as the US Dollar (USD) trades higher, with investors awaiting United States (US) President Donald Trump’s approval to the 60-day Memorandum of Understanding (MoU) with Iran, as reported by Axios.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades slightly higher to near 99.06. However, the DXY corrected sharply from its over seven-week high of 99.10 on Thursday, following media reports that the US and Iran have reached an agreement.
The US-Iran 60-day MoU includes unrestricted energy flow through the Strait of Hormuz, removal of the US blockade on Iranian sea ports, and Tehran's surrendering its plans to build nuclear weapons.
Meanwhile, declining 10-year United Kingdom (UK) gilt yields due to easing expectations of a near-term Bank of England (BoE) interest rate hike are also weighing on the British Pound (GBP). At press time, 10-year UK gilt yields trade 1% lower at around 4.81%, the lowest level seen in almost six weeks.
GBP/USD technical analysis
GBP/USD trades marginally lower at around 1.3440 as of writing. The pair holds below the 20-day Exponential Moving Average (EMA) at 1.3463 and thus retains a mildly bearish near-term bias. The pair sits between a reclaimed upward support trend line around 1.3340 and the descending resistance trend line that was last broken near 1.3611, suggesting broader consolidation within a still-capped structure.
The Relative Strength Index (14) wobbles inside the 40.00-60.00 zone, signaling a lack of directional conviction.
On the topside, initial resistance is located at the 20-day EMA near 1.3463, and a sustained break above this level would open the way toward the May 25 high at 1.3505. While the descending resistance trend line will be the next key hurdle emerging around 1.3611. On the downside, immediate support is defined by the rising trend line drawn from the 1.3180 area, currently coming in close to 1.3340, and a clear drop below this floor would expose a deeper pullback towards 1.3300.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
What is the Pound Sterling?
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
How do the decisions of the Bank of England impact on the Pound Sterling?
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
How does economic data influence the value of the Pound?
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
How does the Trade Balance impact the Pound?
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
