- GBP/USD continues to struggle in markets just above 1.3000.
- Cable operators are bracing for Tuesday’s big UK jobs numbers.
- UK CPI inflation and US retail sales figures will be released later in the week.
GBP/USD held just north of 1.3000 on Monday, with markets taking a relaxed tone ahead of key UK data due in the first half of the trading week. UK wages and job additions are scheduled for early Tuesday, with UK Consumer Price Index (CPI) and Producer Price Index (PPI) inflation on the agenda for Wednesday. US retail sales figures will close the midweek on Thursday, followed by UK retail sales scheduled for the London market session on Friday.
Markets are looking for continued relaxation in UK jobs figures for the quarter ending August. Median market forecasts expect headline average earnings excluding bonuses to fall to 4.9% for the annualized quarter ended August, from 5.1% previously. The change in the number of UK claimants is expected to slow to 20.2K in September from 23.7K in August, while the UK ILO unemployment rate is expected to remain stable at 4.1% for the three-month period ending in August.
It is a data agenda focused on the GBP in the first half of the trading week; UK CPI inflation figures will follow on Wednesday, with headline year-on-year CPI inflation expected to drop to 1.9% from 2.2% previously, although core UK CPI inflation is expected to remain much higher, but still softened to 3.4% from 3.6%.
Significant US data is not expected until Thursday’s US Retail Sales, which is expected to accelerate to 0.3% MoM in September after August’s lackluster 0.1%. However, Cable operators will be largely focused on the Bank of England’s (BoE) Monetary Policy Report hearings on Thursday. UK retail sales figures will close the trading week on Friday, where investors expect the figures to retreat to -0.3% month-on-month in September from 1.0% previously.
GBP/USD Price Forecast
Cable is showing a recent change in momentum on the daily candles after the pair moved below its 50-day EMA at 1.31050 and is currently near 1.3050. GBP/USD has seen a significant correction after peaking in late September, and the 50-day EMA is starting to flatten, suggesting a possible weakening of the uptrend. The pair remains above the 200-day EMA at 1.28450, providing a crucial long-term support level.
From a momentum perspective, the Moving Average Convergence/Divergence (MACD) indicator is signaling bearish pressure. The MACD line (blue) has crossed below the signal line (orange), with the histogram showing rising negative bars. This suggests that selling momentum is increasing, and the pair could face further downside risks if the current trend continues. The movement of the MACD histogram below zero indicates a bearish divergence, confirming the strength of the downtrend.
Key support levels to watch include the psychological level of 1.3000 and the 200-day EMA around 1.28450, which could act as critical buffers. To the upside, the 50-day EMA near 1.31050 serves as a resistance zone. A break above this level would be necessary to regain bullish momentum. However, as long as the pair remains below the 50-day EMA, the outlook remains cautious, with the potential for further declines in the near term.
GBP/USD daily chart
The British Pound FAQs
The British Pound (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, with 12% of all transactions and an average of $630 billion per day, according to 2022 data.
Its key currency pairs are GBP/USD, also known as “Cable”, which represents 11% of the forex market, GBP/JPY, or the “Dragon” as it is known to traders (3%), and EUR/GBP (2%). The pound sterling 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 achieving its main objective of “price stability”, that is, a stable 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 tries to contain it by raising interest rates, which makes access to credit more expensive for individuals and companies. This tends to be 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 projects that generate growth.
The published data gauges the health of the economy and may influence the value of the Pound sterling. 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 Pound. Otherwise, if economic data is weak, the pound is likely to fall.
Another significant data 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 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 wishing 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.
