- GBP/USD fell to 1.2588, reversing gains post-BoE’s decision to maintain current interest rates.
- Technical barriers at 1.2665 cap upward movement, setting stage for potential further declines below 1.2600.
- Key support levels to watch: 1.2550, followed by November and April lows at 1.2486 and 1.2299 respectively.
The British Pound trims some of its earlier gains versus the US Dollar after the Bank of England (BoE) held rates steady and pushed the GBP/USD toward its daily high of 1.2664. However, once the dust settled, the pair retreated below 1.2600, trading at 1.2578 at the time of writing.
GBP/USD Price Forecast: Technical outlook
The GBP/USD remains biased downward, confirming its bias once buyers failed to clear the December 17 swing low, which turned resistance at 1.2665. This opened the door for further losses beneath 1.2600, extending its drop below 1.2590.
Momentum remains bearish, as depicted by the Relative Strength Index (RSI), standing below its neutral line, tilted to the downside.
If sellers would like to remain in charge, they need to clear the 1.2550 area. Once surpassed, the next stop would be the November 22 low of 1.2486, followed by the April 22 low of 1.2299.
Conversely, if buyers want to regain control, they need to reclaim 1.2600, followed by the December 17 high of 1.2728. A breach of the latter will expose the confluence of the 50 and 200-day Simple Moving Averages (SMAs) at around 1.2803 and 1.2815, respectively.
GBP/USD Price Chart – Daily
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.
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