GBP/USD Price Forecast: British Pound extends weakness in process of UK leadership change

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Swiss Franc.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.12%	0.33%	-0.03%	-0.04%	0.40%	0.23%	-0.13%
EUR	-0.12%		0.21%	-0.17%	-0.19%	0.26%	0.11%	-0.25%
GBP	-0.33%	-0.21%		-0.37%	-0.41%	0.03%	-0.09%	-0.47%
JPY	0.03%	0.17%	0.37%		-0.02%	0.44%	0.24%	-0.10%
CAD	0.04%	0.19%	0.41%	0.02%		0.46%	0.29%	-0.08%
AUD	-0.40%	-0.26%	-0.03%	-0.44%	-0.46%		-0.18%	-0.53%
NZD	-0.23%	-0.11%	0.09%	-0.24%	-0.29%	0.18%		-0.36%
CHF	0.13%	0.25%	0.47%	0.10%	0.08%	0.53%	0.36%

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

Andy Burnham becomes Labour leader on Friday, but he will not become Prime Minister (PM) until Monday, as PM Keir Starmer will officially deliver his resignation to King Charles that day,

While the Pound Sterling has been underperforming from Thursday, it is set to end the week on a positive note. The currency performed strongly earlier this week after reports from Financial Times (FT) that incoming PM Burnham will name Shabana Mahmood as Finance Minister (FM), who is considered a fiscal conservative by financial markets.

On the economic data front, investors await the UK employment data for the three months ending May and the Consumer Price Index (CPI) data for June, which will be released next week.

Meanwhile, the US Dollar trades marginally higher amid fears of a resurgence in United States (US) inflation amid elevated energy prices on the back of continued aggression in the Middle East.

GBP/USD technical analysis

GBP/USD trades sharply lower at around 1.3430. However, the pair maintains a modest bullish bias as spot remains above the 20-day exponential moving average (EMA) at 1.3380. The pair declines after facing selling pressure near the downward-sloping border of the Descending Triangle formation above 1.3500.

The Relative Strength Index (14) at 54.9 sits in neutral-positive territory, hinting that buying pressure is constructive but not yet overextended.

On the downside, immediate support is located at the 20-day EMA around 1.3380, where a sustained break would undermine the current positive tone and expose a deeper correction towards 1.3300. On the topside, the first key obstacle is the descending resistance trend line near 1.3515; a daily close above this barrier would reinforce the bullish bias and open the door to further gains in the days ahead.

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

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.