GBP/USD Price Forecast: Weakens below 1.3450 while technical uptrend stays intact
- GBP/USD loses momentum to near 1.3445 in Friday’s early European session.
- Iranian official said the US will 'pay the price' for killing Iranian civilians.
- The constructive outlook of the pair remains intact above the 100-day SMA, with bullish RSI momentum.
- The initial support level to watch is 1.3400; the first upside barrier is located at 1.3515.
The GBP/USD pair trades in negative territory around 1.3445 during the early European trading hours on Friday. Heightened Middle East tensions and rising global oil prices provide some support to a safe-haven currency such as the US Dollar (USD) against the British Pound (GBP). The Michigan Consumer Sentiment Index will be published later on Friday.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf on Thursday denounced the US attack on civilian homes on Qeshm Island, describing it as a continuation of American crimes in the southern Iranian cities of Minab and Lamerd. Earlier on Thursday, the US launched missile strikes across southern Iran, including Qeshm Island as well as parts of Bushehr, Fars and Khuzestan provinces.
Financial markets have priced in a more than 90% chance of the Bank of England (BoE) keeping borrowing costs on hold, with the outside chance of a hike. Traders expect a rise in borrowing costs to 4.0% before the end of the year.
BoE seen on hold as softer UK inflation eases pressure
Analysts at Brown Brothers Harriman note that the Bank of England is “widely expected to keep the policy rate at 3.75% for a fifth straight meeting,” arguing that a “less worrisome UK inflation backdrop gives the BoE room to stand pat.” In their view, the recent moderation in price pressures allows policymakers to maintain the current stance without rushing to adjust rates, reinforcing expectations for an extended pause in the tightening cycle.
Technical Analysis:
In the daily chart, GBP/USD holds a modest bullish bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger middle band around, suggesting underlying dip-buying interest after recent consolidation. The Relative Strength Index (RSI) at about 57 stays in positive but not overbought territory, hinting that upside momentum is constructive yet still measured.
On the downside, immediate support is seen around the 100-day SMA at 1.3400, reinforced by the nearby Bollinger middle band at roughly 1.3390, while a deeper cushion emerges at the lower Bollinger band near 1.3265 should sellers regain control. On the topside, initial resistance aligns with the upper Bollinger band around 1.3515; a sustained break above this cap would open the door for the July 15 high of 1.3558.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling 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 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).
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.
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.
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.
