GBP/USD steady above 1.32 after ISM miss weighs on the US Dollar

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The BoE voted unanimously to hold at 3.75% in March, with former doves shifting to a hold amid rising energy costs.
The ISM Services PMI fell to 54 in March, missing the 55 consensus, as employment dropped and prices paid surged.

GBP/USD traded flat on Monday, settling close to 1.3240 in a thin session with the UK on Easter Monday holiday. The pair bounced modestly from last week's low near 1.3180, which marked the weakest level since mid-March, but the recovery has so far been shallow. Price remains in a broader downtrend from the late January high around 1.3870, with sellers capping rallies toward the 1.3300 area in recent sessions.

On the Pound Sterling side, the Bank of England (BoE) voted unanimously to hold the Bank Rate at 3.75% at its March meeting, a notable shift from the narrow 5 to 4 split in February. Members who had previously supported cuts, including Sarah Breeden and Swati Dhingra, moved to a hold in response to rising energy costs tied to the Middle East conflict. The BoE warned that Consumer Price Index (CPI) inflation is likely to climb to between 3% and 3.5% over the coming quarters, while Gross Domestic Product (GDP) growth remains stalled and unemployment has risen to a 10-year high of 5.2%. Tuesday's S&P Global Services Purchasing Managers Index (PMI) for March, with a consensus of 51.2, is the next key release for the Pound.

On the US Dollar side, the ISM Services PMI fell to 54 in March from 56.1 in February, undershooting the 55 consensus. The employment sub-index dropped to 45.2, its lowest since December 2023, while prices paid surged to 70.7, the highest since October 2022. The combination of weakening payrolls and rising input costs reinforced stagflation concerns tied to the Iran conflict and elevated energy prices. The Federal Reserve (Fed) is holding the federal funds rate at 3.50% to 3.75%, with the Wednesday release of the Federal Open Market Committee (FOMC) minutes and Thursday's core Personal Consumption Expenditures (PCE) Price Index the next major catalysts for the US Dollar.

GBP/USD 5-minute chart

Technical Analysis

In the 5-minute chart, GBP/USD trades at 1.3236. The near-term bias is mildly bullish as price holds a steady grind above the 200-period EMA near 1.3233, keeping the intraday trend underpinned despite the tight range. The latest Stochastic RSI reading has eased back toward the lower half of its scale after failing to extend earlier over the 70 area, indicating fading upside momentum but not an outright bearish reversal while spot remains above the long-term intraday average.

Initial support emerges at 1.3233, where the 200-period EMA aligns with the latest cluster of minor pullbacks, followed by 1.3230 as deeper intraday downside risk if that average fails. A break below 1.3230 would expose 1.3220 as the next support area. On the topside, immediate resistance sits at 1.3240, the recent intraday high printed during the momentum peak, with a break there opening room toward 1.3250 as the next upside target while the short-term bullish bias persists.

(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.