GBP/USD finds further gains ahead of Thanksgiving slowdown

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GBP/USD accelerated into a fifth straight winning session on Wednesday, gaining another 0.55% on the day and pushing through the 1.3200 handle.

GBP/USD clawed its way to a fifth straight session of gains on Wednesday.
Fed rate cut expectations are driving broad-market sentiment higher, pummeling the US Dollar.
Market flows set to slow dramatically amid American Thanksgiving to wrap up the trading week.

GBP/USD accelerated into a fifth straight winning session on Wednesday, gaining another 0.55% on the day and pushing through the 1.3200 handle. Price action is now set to challenge key long-term moving averages, and the ball will remain in Cable bulls’ court through the back half of the trading week.

US markets are set to go functionally dark for the remainder of the week with American market participants taking Thursday and Friday off for Thanksgiving holiday celebrations. Things remain relatively quiet on the UK side of the market on the economic data docket; however, government budget tensions remain elevated as the British parliament grapples with finding ways to fund its operations without barreling into an out-of-control deficit.

According to the CME’s FedWatch Tool, rate traders see over 80% odds of a third straight quarter-point rate trim from the Federal Open Market Committee (FOMC) on December 10. Several key FOMC voting members pivoted into a surprisingly dovish stance over the past week, and the Fed’s overall tone on potential interest rate cuts has shifted dramatically from the overly cautious stance from the last rate meeting.

GBP/USD price forecast

In the daily chart, GBP/USD trades in the 1.3250 region. The 200-day Exponential Moving Average (EMA) trends lower at 1.3265, capping the upside and preserving a mild bearish bias. Price holds beneath this gauge, suggesting rallies remain vulnerable. The slow Stochastic oscillator (14,5,5) has climbed to 71.9, signaling overbought momentum after an upswing.

Momentum shows upside fatigue as the Stochastic oscillator sits near extreme territory, which could precede a pause or shallow pullback. A daily close above the 200-day EMA would turn bias higher and allow an extension, while rejection below the average would maintain a sideways-to-soft tone. A bearish rollover in the Stochastic would reinforce downside risk, whereas a sustained hold above 70 would keep the near-term push intact.

GBP/USD daily chart

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.