- GBP/USD continues to hold steady near the 1.3000 region.
- Key UK CPI inflation data is due early on Wednesday.
- US Durable Goods Orders due later on during the American trading window.
GBP/USD continues to wear worry lines into the charts near the 1.3000 handle as Cable traders draw into the midrange after a near-term bullish recovery lost steam. The pair has yet to draw in a confirmed pullback, as both Pound Sterling and Greenback traders await firmer signs of economic health from either economy.
The US Conference Board (CB) reported a further increase in one-year consumer inflation expectations on Tuesday, now at 6.2% in March compared to 5.8% in February. Consumers continue to express significant concern regarding the persistently high prices of essential household items, such as eggs, along with worries about potential inflation consequences tied to tariffs from the Trump administration. Additionally, the CB’s consumer confidence survey for future economic expectations has dropped to a new 12-year low in March, recording a figure of 65.2, which is substantially below the 80.0 threshold that often indicates a potential recession.
Compounding these issues, Moody’s ratings agency issued a stark warning early Tuesday, stating that the US’s fiscal strength has “deteriorated,” particularly emphasizing the growing issues with the affordability of US debt servicing. Furthermore, Moody’s indicated that the fiscal strength of the US is on course for a multi-year decline, a remark that is likely to provoke dissatisfaction from Donald Trump and his administration, who are presently seeking a significant increase in the debt limit from Congress.
UK Consumer Price Index (CPI) inflation figures are due early Wednesday, which could stoke GBP volumes. Median market forecasts are expecting annualized headline CPI inflation to tick down to 2.9% YoY versus the previous print of 3.0%, however the monthly figure is expected to accelerate to 0.5% MoM in February. January’s monthly CPI print initially contracted by 0.1%, and traders will be keeping a close eye out for any heavy revisions to recent data.
On the US side, Durable Goods Orders are due during the New York market session. Overall Durable Goods Orders are expected to decline in February, forecast to come in at -1.0% after January’s firm 3.2% rebound.
GBP/USD price forecast
GBP/USD continues to find room to play as price action remains locked in a near-term sideways grind between 1.3000 and 1.2900. Bids remain unable to find traction on either side of the rough congestion pattern, though Cable bulls will be able to find some room to breathe as intraday momentum remains firmly above the 200-day Exponential Moving Average (EMA) near 1.2700.
GBP/USD daily chart
Pound Sterling FAQs
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).
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.
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.
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.
Read the full article here