Category: Forex News, News
GBP/USD Forecast: Technicals turn slightly bullish for Pound Sterling amid Mideast drama
The Pound Sterling (GBP) staged a stellar recovery from near four-month lows against the US Dollar (USD) and clinched two-month highs just shy of the 1.3500 threshold.
Pound Sterling bulls returned with a bang
The week started with the domination of safe-haven flows and the risk-sensitive Pound Sterling in multi-month troughs.
Markets remained nervous as they weighed US President Donald Trump’s social media threat posted on Sunday, in which he ratcheted up pressure on Iran, while extending the deadline to reopen the Strait of Hormuz to Tuesday at 8 PM Eastern Time or Wednesday 00:00 GMT.
On the other side, Iran mulled a “much more devastating” retaliation if civilian targets are hit. Against the deepening escalation in the Middle East conflict, investors scurried for safety in the world’s reserve currency, the USD, once again, extending its recovery.
The Greenback also capitalized on the increased expectations about the US Federal Reserve’s (Fed) interest rate outlook, especially after a blockbuster February jobs report.
Data released by the Bureau of Labor Statistics (BLS) on Friday showed that US Nonfarm Payrolls jumped by 178K in March, against the consensus of +60K and a 133K drop recorded in February (revised down from -92K). The Unemployment Rate unexpectedly fell to 4.3%, vs. 4.4% consensus and 4.4% prior.
However, the GBP/USD showed some resilience and embarked upon a recovery as the USD failed to sustain at higher levels against its major counterparts. The tide entirely turned against the buck following Trump’s TACO trade early Wednesday, which provided legs to the GBP/USD rebound.
Risk-on flows returned with a bang after the United States (US) and Iran brokered a two-week ceasefire and agreed to enter negotiations on April 10, potentially paving the way for a lasting peace in the Middle East and resumption of Gulf oil and gas exports through the vital Strait of Hormuz.
In light of the de-escalation, the currency pair stretched higher and reached the highest levels in two months just below 1.3500.
However, GBP/USD sellers quickly jumped in and triggered a sharp retracement amid investors’ concerns over whether Trump would stick to the ceasefire agreement ahead of Friday’s negotiations on the ten-point proposal.
The Iranian proposal submitted to the US on Wednesday included maximalist demands that the Trump administration previously rejected.
The Greenback regained its safe-haven bid in the latter part of the week as doubts about the Mideast ceasefire countered the dovish Minutes of the Fed’s March monetary policy meeting.
Israel continued its attacks on the Iran-aligned militant group, Hezbollah, in Lebanon. Iranian Foreign Minister Abbas Araghchi noted that the announcement said that the ceasefire included Lebanon.
On Friday, Israeli Prime Minister Benjamin Netanyahu said that there is “no ceasefire in Lebanon” and Israel would continue “to strike Hezbollah with full force”. Late Thursday, Netanyahu had issued an instruction to start direct negotiations with Lebanon “as soon as possible,” per the Washington Post.
Also, sentiment remained fragile and kept the pair on the back foot ahead of the highly-anticipated US-Iran peace talks and the top-tier Consumer Price Index (CPI) report from the US.
The BLS reported ahead of the weekend that annual inflation in the US, as measured by the change in the CPI, climbed to 3.3% in March from 2.4% in February. This print came in line with the market expectation. Additionally, the core CPI, which excludes volatile food and energy prices, rose 0.2% on a monthly basis, compared to analysts’ estimate of 0.3%. The USD struggled to gather strength following these data and allowed GBP/USD to remain in the upper half of its weekly range.
Middle East updates and Bailey’s speech on tap
After an eventful week, the focus will continue to remain on any signs of de-escalation in the Middle East conflict following Friday’s US-Iran negotiations.
The economic calendar is relatively light in the US, while the UK docket has several appearances of the Bank of England (BoE) Governor Andrew Bailey throughout the week.
Monday is devoid of any high-impact macro releases, while Tuesday features the US ADP four-week Employment Change and Producer Price Index (PPI) data.
Bailey is scheduled to participate in a moderated discussion about the future of central banking at Columbia University, in New York, later on Tuesday. A bunch of Fed policymakers are also lined up that day.
Bailey will speak on Wednesday at two separate events. On Thursday, the UK monthly growth and industrial numbers will be reported, followed by the US weekly Jobless Claims data.
The Fed and BoE officials are set to deliver their speeches on Friday, filling up the data-dry calendar.
Beyond the statistics and speeches from the central bank officials, developments on the US-Iran war will remain the main market driver.
GBP/USD technical analysis
In the daily chart, GBP/USD trades at 1.3468, holding a constructive bullish tone as spot sits above the 20-, 50-, 100- and 200-day simple moving averages clustered between roughly 1.3324 and 1.3435. This stacked moving average support suggests the recent recovery remains intact, while the Relative Strength Index (14) around 58 leans positive without yet flagging overbought conditions, hinting that buyers still retain control in the near term.
On the topside, initial resistance emerges at the horizontal barrier near 1.3555, ahead of a stronger cap at 1.3700, where sellers may look to fade extended advances. On the downside, immediate protection is provided by the tight cluster of the 50-day SMA at 1.3435, the 100-day SMA at 1.3434 and the 200-day SMA at 1.3413, with the 20-day SMA lower at 1.3324 before more substantial horizontal support at 1.3221, 1.3160 and 1.3034.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Written by : Editorial team of BIPNs
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