GBP/USD continues to rally, searching for 1.2900
- GBP/USD rose another 0.85% on Wednesday as the Pound rally continues.
- Greenback flows are softening as markets bet on tariff pivots.
- Cable’s three-day rally has surged around 2.6%.
GBP/USD hit the gas pedal and pumped out another strong session on Wednesday, lurching higher by another 0.85% and notching in a third straight session of firmly bullish gains. Pound markets are firmly recovering after weeks of uneasy risk appetite, pushing GBP/USD to 16-week highs.
Despite warnings that the UK economy is overall weakening, Cable markets rallied following Wednesday’s Monetary Policy Hearings from the Bank of England (BoE). According to BoE Governor Andrew Bailey, A modest uptick in inflation is expected despite weaker growth figures, causing markets to readjust their rate-cut expectations for the rest of 2025. Rate markets now see less than 50 bps of total interest rate trims for the remainder of the year.
ADP Employment Change for February showed only 77K new jobs, well below the forecast of 140K and March’s 186K. Despite this, the ADP results have consistently failed to correlate with Nonfarm Payrolls (NFP) since a reporting change in 2022, meaning the poor performance holds little significance.
Read more:
US White House Press Secretary Leavitt: Trump will give auto industry an extension on tariffs
US President Donald Trump mulls exempting certain agricultural products from Canada, Mexico tariffs
This week, the Trump administration announced a one-month delay on tariffs for the automotive sector, which relies heavily on foreign trade. This exemption was retroactively declared as Trump’s team seeks to impose tariffs on trading partners without harming the US economy.
There is little of note on the UK side of the economic data docket this week, leaving this Friday’s US Nonfarm Payrolls (NFP) as the key print for traders to worry about. US net jobs additions are expected to rebound slightly in February to 160K from January’s overwhelmingly unremarkable 143K print.
GBP/USD price forecast
GBP/USD’s 100+ pip gain on Wednesday has pushed price action well above the 200-day Exponential Moving Average (EMA) near 1.2685. The pair could be poised for a new medium-term bull run, but a brief exhaustion play could be on the cards as technical oscillators continue to signal overbought conditions.
GBP/USD has gained 6.62% bottom-to-top since mid-January’s swing low into the 1.2100 handle. However, nearly a quarter of those gains have come in the last three days, with Cable rising over 323 pips since the start of the week, implying a general rise in volatility may lead to disappointing long-term momentum.
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.
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