GBP/USD Price Forecast: Maintains constructive uptrend above 1.3500 despite mild losses
- GBP/USD posts modest losses near 1.3535 in Thursday’s early European session.
- The pair keeps a positive tone above the 100-day SMA, with bullish RSI momentum.
- The first downside target to watch is 1.3400; the immediate resistance level is seen at 1.3637.
The GBP/USD pair trades with mild losses around 1.3535 during the early European trading hours on Thursday. Markets might turn cautious ahead of the UK Gross Domestic Product (GDP) report and the US Retail Sales data, which are due later on Thursday.
Traders raise their bets on rate hikes from the Bank of England (BoE) this year, given the expected impact on inflation from higher oil prices. Money markets are fully pricing in a hike by the November policy meeting, with a second rate hike priced in by April 2027, according to Reuters. Prior to the US-Iran war, traders had been expecting the BoE to lower interest rates twice this year.
Technical Analysis:
In the daily chart, GBP/USD extends its advance above the 100-day simple moving average (SMA) and comfortably above the 20-day Bollinger middle band, which together reinforce a bullish near-term bias. The pair is now pressing the upper Bollinger band around 1.3534, suggesting a stretched but still constructive upswing, while the Relative Strength Index (14) at about 65 hints at firm bullish momentum that is edging toward overbought territory rather than outright exhaustion.
On the downside, immediate support is seen at the 100-day SMA at 1.3400, with the Bollinger middle band at 1.3325 providing a deeper cushion if a corrective pullback unfolds. A more pronounced decline would likely target the recent volatility floor around the lower Bollinger band near 1.3117. On the upside, the first upside barrier emerges at the May 8 high of 1.3637. Any follow-through buying above this level could pave the way to the 1.3700 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.