GBP/USD Price Forecast: Extends recovery to near 20-day EMA amid hopes of commitment to fiscal rules

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.04%	-0.64%	0.36%	0.16%	-0.03%	-0.47%	-0.16%
EUR	-0.04%		-0.73%	0.31%	0.06%	-0.09%	-0.58%	-0.25%
GBP	0.64%	0.73%		1.08%	0.80%	0.63%	0.15%	0.48%
JPY	-0.36%	-0.31%	-1.08%		-0.22%	-0.40%	-0.74%	-0.54%
CAD	-0.16%	-0.06%	-0.80%	0.22%		-0.18%	-0.52%	-0.24%
AUD	0.03%	0.09%	-0.63%	0.40%	0.18%		-0.47%	-0.15%
NZD	0.47%	0.58%	-0.15%	0.74%	0.52%	0.47%		0.30%
CHF	0.16%	0.25%	-0.48%	0.54%	0.24%	0.15%	-0.30%

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).

Historically, the entry of a new leader into the parliament leads to changes in the government’s current economic agenda. However, Greater Manchester Mayor Andy Burnham, the frontrunner for the UK’s leadership position after Prime Minister (PM) Keir Starmer’s resignation, has vowed to stick with the pointers reflected in the Labour Party’s 2024 manifesto, a scenario that indicates the continuation of ongoing fiscal policy.

On the domestic front, the UK economic outlook appears to be weak, following remarks from Bank of England (BoE) Governor Andrew Bailey at the European Central Bank (ECB) Forum in Sintra on Wednesday that he opted to hold interest rates steady in the July policy meeting as the economy is softening.

Meanwhile, slight pressure on the US Dollar ahead of the United States (US) Nonfarm Payrolls (NFP) data for June, which will be published at 12:30 GMT, is also supporting GBP/USD.

Market participants will pay close attention to the US NFP data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

GBP/USD technical analysis

GBP/USD trades higher at around 1.3289 in the European session. The pair has recovered to near the 20‑day exponential moving average (EMA) at 1.3295, suggesting that the near-term trend has turned neutral.

The Relative Strength Index (14) at 46.6 sits below the neutral 50 line, hinting at subdued bullish momentum and reinforcing the idea of a market that is consolidating with a slight downside skew rather than staging a decisive recovery.

On the topside, immediate resistance is defined by the 20‑day EMA at 1.3295, and a clean daily close above this barrier would be needed to ease current downside pressure and allow a more constructive tone to develop. The pair could extend the advance towards 1.3400 if it decisively breaks above the 20-day EMA. On the contrary, the pair could resume its decline if it fails to rise above the 20-day EMA. Looking down, the June 24 low at 1.3140 is the key support level.

(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.