GBP/USD Price Forecast: Advances, yet remains below 1.2600
- GBP/USD climbs as financial markets respond positively to Trump's choice for Treasury Secretary, Scott Bessent.
- The pair still shows a downward trend, with key support being 1.2550 and 1.2486, potentially leading to a retest of the annual low at 1.2299.
- If bulls move in, they could test 1.2600 and November's high of 1.2659, followed by the 200-day SMA at 1.2818.
The Pound Sterling advances modestly against the Greenback on Monday, with market participants digesting US President-Elect Donald Trump's naming of Scott Bessent as Treasury Secretary. Bessent, an advocate for lower taxes and tariffs, was well-received by the markets as risk appetite improved. The GBP/USD trades at 1.2586, up 0.52%.
GBP/USD Price Forecast: Technical outlook
Despite posting gains, the GBP/USD remains downward biased after slipping below the 200-day Simple Moving Average (SMA) at 1.2818. If buyers want to regain the control, they need to conquer the 1.2600 figure, followed by a clear break of November’s 21 peak at 1.2659, which could exacerbate a rally to 1.2700. On further strength, the 200-day SMA is up next.
Meanwhile, bears remain in charge, targeting 1.2550 as the first support level. Once surpassed, they will set their sights on the November 22 low of 1.2486, followed by the year-to-date (YTD) low of 1.2299.
Indicators such as the Relative Strength Index (RSI) remain bearishly biased, near oversold territory, and hints the downtrend remains strong.
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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