- GBP/USD recovers near 1.2690 in the early hours of the European session on Wednesday.
- The negative view of the pair prevails below the 100-day EMA with a bearish RSI indicator.
- The potential support level is at 1.2600; The first resistance level is seen at 1.2750.
The GBP/USD pair is trading in positive territory for the second consecutive day around 1.2690 during the European session on Wednesday. However, upside potential for GBP/USD appears limited as expectations of a less aggressive interest rate cut by the US Federal Reserve (Fed) and concerns over the president-elect’s tariff policies of the US, Donald Trump, could provide some support to the Dollar. Investors await Federal Reserve Chairman Jerome Powell’s speech for clues about the outlook for interest rates.
The bearish outlook for GBP/USD remains in place as the major pair remains below the key 100-day EMA on the daily time frame. Furthermore, the 14-day Relative Strength Index (RSI) remains limited below the midline around 45.35, suggesting that a further decline cannot be ruled out.
The psychological level of 1.2600 acts as an initial support level for the main pair. Further south, the next bearish target to watch is 1.2467, the lower boundary of the Bollinger Band. A break of this level could push prices towards 1.2331, the April 23 low.
In the bullish case, the first resistance level is observed at 1.2750, the high of November 29. Sustained bullish momentum could see a rally to 1.2875, the 100-day EMA. The additional upside filter emerges at 1.2920, the upper boundary of the Bollinger Band.
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 piece of information 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.
