- GBP/USD rebounds from the daily low of 1.2707 to trade above the 1.2800 level.
- Key Resistance Levels Recovered: 50-day SMA at 1.2787 and 1.2800 level; next targets are 1.2860, 1.2900 and 1.2950.
- If GBP/USD drops below 1.2800, it could range between 1.2800 and 1.2700, with additional support at the 100-day SMA (1.2683).
The British Pound rebounded sharply against the US Dollar after recent economic data from the United States (US) sparked speculation that the US Federal Reserve could cut interest rates faster than expected. GBP/USD is trading at 1.2833 after hitting a daily low of 1.2707.
The US dollar is taking a hit, given the backdrop of the July ISM manufacturing PMI falling to its lowest level since December 2023 and Non-Farm Payrolls falling short of expectations. Market participants had started to price in a larger rate cut at the upcoming September meeting.
GBP/USD Price Analysis: Technical Outlook
After falling during the week, the GBP/USD reclaimed key resistance levels such as the 50-day moving average (DMA) at 1.2787 and the 1.2800 level. Momentum shifted in favor of buyers as the Relative Strength Index (RSI) turned bullish.
If GBP/USD closes above 1.2800, that can pave the way for testing the June 12 high at 1.2860 and exposing the psychological figure of 1.2900. Once surpassed, further upside is seen, with the next stop at 1.2950, which capped price action for four consecutive days before buyers could challenge 1.3000.
Conversely, if the sellers drag the GBP/USD pair below 1.2800, then the pair might remain range-bound within the 1.2800-1.2700 level, which, if broken, will expose the 100-day SMA at 1.2683.
GBP/USD Price Action – Daily Chart
The British Pound 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 currency unit in the world, accounting for 12% of all transactions and an average of $630 billion a day, as of 2022.
Its key currency pairs are GBP/USD, also known as the “Cable,” which accounts for 11% of the forex market, GBP/JPY, or the “Dragon” as it is known to traders (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 British Pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on achieving its main objective of “price stability”, i.e. a stable inflation rate of around 2%. Its main tool for achieving this is the adjustment of interest rates.
When inflation is too high, the Bank of England tries to contain it by raising interest rates, making credit more expensive for individuals and businesses. This is generally positive for the GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation is too low, it is a sign that economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to make credit cheaper, so that companies borrow more to invest in growth-generating projects.
The data released gauges the health of the economy and can influence the value of the Pound. Indicators such as GDP, manufacturing and services PMIs, and employment can influence the direction of the Pound.
A strong economy is good for the British Pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen the British Pound. Conversely, if economic data is weak, the British Pound is likely to fall.
Another significant indicator for the 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 sought-after exports, its currency will benefit exclusively from the additional demand created by foreign buyers who wish to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for 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.
