GBP/USD Price Forecast: Stays capped below key 100-day SMA with UK GDP in focus

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The GBP/USD pair trades on a flat note around 1.3415 during the early European trading hours on Friday. Traders prefer to wait on the sidelines ahead of the release of the monthly UK Gross Domestic Product (GDP).

GBP/USD flatlines near 1.3415 in Friday’s early European session.
The cross keeps the bearish vibe under the 100-day SMA.
The immediate resistance level emerges at 1.3420; the first downside target to watch is 1.3343.

The UK economy is expected to contract by 0.1% in April, compared to an expansion of 0.3% in the previous reading. If the report shows a stronger-than-expected outcome, this could underpin the British Pound (GBP) against the US Dollar (USD) in the near term.

On the other hand, uncertainty in the Middle East could boost a safe-haven currency such as the Greenback and act as a headwind for the major pair. Fox News reported on Friday that US forces intercepted and shot down two Iranian one-way attack drones near the Strait of Hormuz after Iran attempted to target commercial vessels transiting the waterway.

Technical Analysis:

In the daily chart, GBP/USD trades with a mildly bearish near-term bias, holding under the 100-day simple moving average (SMA) and the Bollinger upper band. Price is also fractionally below the Bollinger middle band, keeping spot capped by nearby dynamic resistance, while the Relative Strength Index (RSI) at 48 leans neutral and suggests a consolidative tone rather than impulsive selling for now.

On the topside, initial resistance is located at the Bollinger middle band around 1.3420, followed by the 100-day SMA at 1.3472, with the upper Bollinger band near 1.3500 reinforcing a wider supply zone. On the downside, the next notable support is the lower Bollinger band around 1.3343, where a break would open the door to a deeper retracement within the broader range.

(The technical analysis of this story was written with the help of an AI tool.)

Pound Sterling FAQs

What is the Pound 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 unit for foreign exchange (FX) 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, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in 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 economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, 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 but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release 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 over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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