- GBP/USD turned in a slow circle on Thursday as Cable traders await new data.
- It has been a quiet week on the economic calendar for the British Pound.
- Global PMI data is due out on Friday, but mixed results are expected.
GBP/USD curled near the 1.3550 level on Thursday as Cable traders functionally ignored a thin economic calendar and lack of meaningful information to push the pair decisively in either direction. Headlines from US President Donald Trump dominated most traders’ news feeds, but the impact on the broader market remains limited as Trump struggles to pick an overall target.
President Donald Trump lashed out on a wide range of issues during his appearance at the WEF’s annual meeting in Switzerland, colloquially known as Davos, the city that hosts the forum each year. President Trump reminded all listeners that he intended to “wipe out” the US budget deficit, while somehow convincing the US Congress to pass “the largest tax cut in US history.” United” at the same time. Donald Trump also promised to try to subvert the operational independence of the US Federal Reserve (Fed) by demanding lower interest rates.
S&P Global PMI figures will be released on both sides of the Atlantic on Friday and show changes in the aggregate results of respondents from business operators across the economy. UK and US PMI business activity survey results for January are expected to be mixed this week, with services components declining and manufacturing recovering, albeit slightly. PMI numbers generally have limited impact unless results are completely out of sync with forecasts, but respondent response rates tend to be low, and the overall numbers should be taken with a grain of salt.
GBP/USD Price Forecast
GBP/USD continues to reach but remain just below the 1.2400 level as price action floods near 1.2350. The bullish momentum is about to run out with the pair struggling to advance further, although bids remain around 2% above the pair’s 15-month low, valued near 1.2100 a couple of weeks ago.
Price action has established strong technical support around the 1.2200 area, but a downward-sloping 50-day exponential moving average (EMA) near 1.2500 is hindering the development of sustained bullish moves.
GBP/USD Daily Chart
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.
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