GBP/USD Forecast: Pound Sterling could attract buyers once it clears 1.2400
- GBP/USD stages a rebound after touching a multi-month low on Monday.
- Pound Sterling gathers strength against its rivals despite mixed PMI data.
- The pair could extend its recovery once it stabilizes above 1.2400.
GBP/USD gathered recovery momentum and climbed above 1.2350 in the European trading hours on Tuesday after touching a five-month low of 1.2300 on Monday. 1.2400 aligns as key short-term resistance for the pair.
The improving risk mood made it difficult for the US Dollar (USD) to outperform its rivals in the American session on Monday and helped GBP/USD pull away from multi-month lows.
Early Tuesday, the data from the UK showed that the S&P Global/CIPS Manufacturing PMI declined to 48.7 in early April, showing a contraction in the manufacturing sector’s business activity. On a positive note, the S&P Global/CIPS Services PMI rose to 54.9 from 53.1.
Pound Sterling price today
The table below shows the percentage change of Pound Sterling (GBP) against listed major currencies today. Pound Sterling was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.18% | -0.21% | 0.01% | 0.03% | 0.02% | 0.16% | -0.05% | |
| EUR | 0.18% | -0.03% | 0.19% | 0.23% | 0.20% | 0.35% | 0.12% | |
| GBP | 0.21% | 0.04% | 0.22% | 0.25% | 0.24% | 0.38% | 0.17% | |
| CAD | -0.01% | -0.19% | -0.22% | 0.04% | 0.01% | 0.16% | -0.06% | |
| AUD | -0.03% | -0.21% | -0.26% | -0.04% | -0.02% | 0.12% | -0.11% | |
| JPY | -0.02% | -0.20% | -0.24% | -0.02% | 0.02% | 0.15% | -0.08% | |
| NZD | -0.16% | -0.35% | -0.38% | -0.16% | -0.12% | -0.14% | -0.23% | |
| CHF | 0.04% | -0.14% | -0.18% | 0.04% | 0.07% | 0.05% | 0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Assessing the UK PMI reports, “early PMI survey data for April indicate that the UK economy’s recovery from recession last year continued to gain momentum,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
“While the improving economic recovery picture is welcome news, the upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” Williamson added.
On the second half of the day, PMI data from the US will be watched closely by market participants. S&P Global Manufacturing PMI and Services PMI are both forecast to come in at 52 in April. A reading below 50 in either of those data could weigh on the USD. Investors will also pay close attention to changes in risk perception. In case risk flows dominate the action with a bullish opening in Wall Street, the USD could come under renewed bearish pressure.
GBP/USD Technical Analysis
GBP/USD faces immediate resistance at 1.2400, where the mid-point of the descending channel and the 20-period Simple Moving Average (SMA) on the 4-hour chart are located. Once the pair stabilizes above this level, it could target 1.2440 (50-period SMA) and 1.2500 (psychological level, static level) next.
On the downside, interim support aligns at 1.2350 (static level) before 1.2300 (static level, lower limit of the descending channel).
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, aka ‘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.