Sterling maintains bullish stance ahead of US data

VaselineAugust 15, 2024

0 4 minutes read

Sterling maintains bullish stance ahead of US data

GBP/USD remains in positive territory near 1.2850 on Thursday.
The pair’s technical outlook remains bullish after Wednesday’s pullback.
Investors await mid-level US macroeconomic data.

Following Tuesday’s rally, GBP/USD reversed course and closed in negative territory on Wednesday. The pair is regaining traction and trading around 1.2850 in Thursday’s European session.

Sterling PRICE This week

The table below shows the percentage change in the British Pound (GBP) against the main listed currencies this week. The pound was strongest against the Japanese yen.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.88%	-0.73%	0.50%	-0.24%	-0.78%	-0.12%	0.18%
EURO	0.88%		0.17%	1.36%	0.64%	-0.02%	0.76%	1.08%
GBP	0.73%	-0.17%		1.46%	0.47%	-0.19%	0.58%	0.90%
JPY	-0.50%	-1.36%	-1.46%		-0.72%	-1.34%	-0.63%	-0.36%
CAD	0.24%	-0.64%	-0.47%	0.72%		-0.59%	0.12%	0.44%
AUD	0.78%	0.02%	0.19%	1.34%	0.59%		0.78%	1.09%
NZD	0.12%	-0.76%	-0.58%	0.63%	-0.12%	-0.78%		0.31%
CHF	-0.18%	-1.08%	-0.90%	0.36%	-0.44%	-1.09%	-0.31%

The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose British Pound in the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will be GBP (basis)/USD (quote).

Although the US dollar (USD) struggled to outperform rivals following consumer price index (CPI) figures on Wednesday, GBP/USD edged lower as weaker-than-forecast UK inflation data for July weighed on pound sterling.

Earlier on Thursday, the UK’s Office for National Statistics reported that Britain’s Gross Domestic Product (GDP) grew at an annual rate of 0.9% in the second quarter. This reading followed the 0.3% increase recorded in the first quarter and came in line with market expectations. Other UK data showed that manufacturing output and industrial production rose by 1.1% and 0.8% respectively on a monthly basis in June.

Upbeat UK data combined with improved sentiment helped GBP/USD rise in the European session.

Later in the day, weekly data on July initial jobless claims and retail sales will be presented in the US economic register. A noticeable drop in first-time jobless claims and a 0.5% or more rise in retail sales could help the USD gather strength and cap GBP/USD’s gains.

However, GBP/USD could look to stretch higher, even as the immediate reaction to the US data supports the USD, should risk flows dominate financial markets after Wall Street’s opening bell. At press time, U.S. stock index futures were up between 0.2% and 0.3%.

GBP/USD Technical Analysis

GBP/USD closed the last 4-hour candle comfortably above the 200-period simple moving average, and the RSI returned above 60 after dipping towards 50, highlighting sellers’ hesitancy.

1.2850 (Fibonacci 50% retracement of the most recent uptrend) lines up as a pivotal level for the pair. If GBP/USD manages to stabilize above this level, 1.2900 (61.8% Fibonacci retracement) could be seen as the next resistance before 1.2950 (78.6% Fibonacci retracement). On the downside, first support is located at 1.2830 (200-period SMA) before 1.2800 (100-period SMA, 38.2% Fibonacci retracement) and 1.2760 (23.6% Fibonacci retracement).

Frequently Asked Questions for Pounds Sterling

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 foreign exchange (FX) unit in the world, accounting for 12% of all trades, averaging $630 billion per day as of 2022. Its key trading pairs are GBP/USD, aka “Cable”, which represents 11% of FX, 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 BoE bases its decisions on whether it has achieved its main objective of “price stability” – a steady inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the BoE 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 GBP as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low, it is a sign that economic growth is slowing. In this scenario, the BoE will consider cutting interest rates to reduce credit so that companies borrow more to invest in growth-generating projects.

Data releases measure the health of the economy and can affect the value of the pound. Indicators such as GDP, manufacturing and services PMI and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment, it may encourage the BoE to raise interest rates, which will directly strengthen the GBP. Otherwise, if the economic data is weak, the pound is likely to fall.

Another significant release of data 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 in a given period. If a country produces highly sought-after exports, its currency will only benefit from the additional demand created by foreign buyers looking to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

VaselineAugust 15, 2024

0 4 minutes read

Sterling PRICE This week

GBP/USD Technical Analysis

Frequently Asked Questions for Pounds Sterling

Vaseline

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