GBP/USD Price Forecast: Constructive view prevails above 1.3300 ahead of US PCE inflation data

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The GBP/USD pair trades on a flat note near 1.3330 during the Asian trading hours on Friday. Traders prefer to wait on the sidelines ahead of the key US inflation report later on Friday.

GBP/USD flat lines around 1.3330 in Friday’s Asian session.
The positive view of the major pair prevails above the 100-day EMA, with a bullish RSI indicator.
The first upside barrier emerges at 1.3348; the first support level to watch is 1.3300.

The GBP/USD pair trades on a flat note near 1.3330 during the Asian trading hours on Friday. Traders prefer to wait on the sidelines ahead of the key US inflation report later on Friday. The US delayed Personal Consumption Expenditures (PCE) Price Index report for September could offer some hints about the US interest rate path.

Meanwhile, rising bets for a rate cut by the US Federal Reserve (Fed) next week could weigh on the US Dollar (USD) and create a tailwind for the major pair. According to the CME FedWatch Tool, interest rate futures traders are pricing in a nearly 89% chance of a quarter percentage point cut in the Fed funds rate by the Fed at the December meeting, to 3.50%-3.75%, up from just 63% a month ago.

On the other hand, concerns over the UK economic outlook and expectations of faster-than-expected monetary easing by the Bank of England (BoE) might undermine the Cable against the USD. A majority of analysts expect the UK central bank to cut interest rates to 3.75% in December, with markets pricing in a 90% probability.

Technical Analysis:

In the daily chart, GBP/USD trades at 1.3328. The pair holds above the 100-EMA at 1.3300, and the average has flattened after a prior slide, supporting a firmer tone. Price hovers near the upper Bollinger Band at 1.3348 as bands widen, signaling rising volatility and bullish pressure. RSI at 61 shows positive momentum without overbought conditions.

Initial resistance is set by the upper band at 1.3348, where a close higher could extend gains. Immediate support aligns with the 100-EMA at 1.3300, followed by the middle band at 1.3189 and the lower band at 1.3029. Holding above the average would keep the bias higher, while a pullback toward the middle band would cool the advance.

(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.