- GBP/USD found respite from the recent bearish momentum.
- Cable broke a six-day losing streak, recovering a scant half a percentage point.
- UK CPI inflation figures will be released mid-week.
GBP/USD rose 0.5% on Monday, starting the new trading week with a bullish rally that ended a six-day losing streak and paring recent losses to bring price action back into the zone. of 1.2700. The gains in Cable bids are due more to a general relaxation of the US Dollar’s one-way momentum than any intrinsic strength in the Pound, with GBP traders preparing for the new update of the Price Index inflation figures. This week’s UK Consumer Price Index (CPI).
It was a quiet start to the trading week with a limited economic agenda on Monday. Markets pivoted into risk-on recovery mode, easing bullish pressures that have bolstered the US dollar in recent weeks.
The Bank of England (BoE) will heat up Cable action on Tuesday with the UK central bank’s latest Monetary Policy Report Hearings scheduled for Tuesday, but GBP traders will focus on the UK CPI release for October on Wednesday. Markets forecast that annualized UK CPI inflation will accelerate to 2.2% year-on-year in October from the previous reading of 1.7%, while UK core CPI is expected to remain stable at 3.0%. 2% year-on-year.
Markets are getting a nice reprieve from high-impact US economic data this week, although Cable traders will be keeping an eye on the UK retail sales update on Friday, as well as the U.K. Index numbers. S&P Purchasing Managers (PMI) on both sides of the Atlantic to close the trading week.
GBP/USD Price Forecast
The British pound held firm and recovered a scant 0.5% on Monday, but accumulated losses still keep Cable stuck in bearish territory south of the 200-day EMA near 1.2850.
GBP/USD hit multi-month lows in the 1.2600 area last Friday, in a complete reversal of the pair’s multi-year highs set in September this year. The pair lost 6.25% top to bottom from September’s peak at 1.3434, and a short-term bullish bounce could see a new round of short positions building up between 1.2700 and 1.2800.
GBP/USD Daily Chart
The British Pound FAQs
The British Pound (GBP) is the oldest currency in the world (AD 886) and the official currency of the United Kingdom. It is the fourth most traded foreign exchange (FX) unit 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, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The British Pound is issued by the Bank of England (BoE).
The most important factor influencing the value of the Pound Sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it has achieved its main objective of “price stability” – a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for sterling, as higher interest rates make the UK a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing. In this scenario, the Bank of England will consider lowering interest rates to make credit cheaper, so that companies will take on more debt to invest in projects that generate growth.
The data released measures the health of the economy and may affect the value of the pound. Indicators such as GDP, manufacturing and services PMIs and employment can influence the direction of the Pound.
Another important data that is published and affects the British Pound is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a given period. If a country produces highly in-demand export products, its currency will benefit exclusively from the additional demand created by foreign buyers seeking to purchase those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
