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Sellers could take action if 1.2700 support fails

By Published On: May 31, 20249.1 min readViews: 1840 Comments on Sellers could take action if 1.2700 support fails

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  • GBP/USD holds above 1.2700, struggles to build on Thursday’s gains.
  • April PCE inflation data from the US could drive the pair’s action.
  • Technical sellers could take action if GBP/USD slumps below 1.2700.

GBP/USD benefited from the selling pressure surrounding the US Dollar (USD) and closed the day in positive territory on Thursday. Although the pair manages to hold above 1.2700 in the European session on Friday, it struggles to extend its recovery ahead of key inflation data from the US.

The US Bureau of Economic Analysis (BEA) announced on Thursday that it revised the annualized Gross Domestic Product (GDP) growth for the first quarter lower to 1.3% from 1.6% in the first estimate. The benchmark 10-year US Treasury bond yield turned south and lost more than 1% on the day after the GDP data, causing the USD to stay weak against its major rivals.

British Pound PRICE This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the weakest against the Swiss Franc.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.10% 0.17% 0.13% -0.09% -0.22% -0.23% -0.94%
EUR -0.10%   0.04% 0.05% -0.20% -0.39% -0.42% -1.02%
GBP -0.17% -0.04%   -0.06% -0.27% -0.42% -0.40% -1.09%
JPY -0.13% -0.05% 0.06%   -0.25% -0.36% -0.26% -1.10%
CAD 0.09% 0.20% 0.27% 0.25%   -0.15% -0.13% -0.91%
AUD 0.22% 0.39% 0.42% 0.36% 0.15%   0.05% -0.67%
NZD 0.23% 0.42% 0.40% 0.26% 0.13% -0.05%   -0.73%
CHF 0.94% 1.02% 1.09% 1.10% 0.91% 0.67% 0.73%  

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).

The BEA will publish the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s (Fed) preferred gauge of inflation, for April later in the day. Investors will pay close attention to the monthly core PCE Price Index reading, which excludes volatile food and energy prices and doesn’t get distorted by base effects.

Markets expect the core PCE Price Index to rise 0.3% in April, matching March’s increase. According to the CME FedWatch Tool, the probability of a 25 basis points Fed rate cut in September currently stands at about 50%. A monthly increase of 0.4%, or bigger, in the monthly core PCE Price Index could feed into expectations for a Fed policy hold in September and provide a boost to the USD. On the other hand, a smaller-than-forecast increase could weigh on the USD and open the door for a rebound in GBP/USD heading into the weekend.

GBP/USD Technical Analysis

The lower limit of the ascending regression channel coming from late April aligns as key support at 1.2700. A daily close below this level could attract technical sellers. In this scenario, the 20-day Simple Moving Average (SMA) could be seen as the next bearish target at 1.2650 before 1.2630 (100-day SMA).

On the upside, resistances are located at 1.2760-1.2770 (Fibonacci 78.6% retracement of the latest downtrend, mid-point of the ascending regression channel) and 1.2800 (psychological level, static level).

Pound Sterling FAQs

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, aka ‘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).

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.

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.

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.

 

  • GBP/USD holds above 1.2700, struggles to build on Thursday’s gains.
  • April PCE inflation data from the US could drive the pair’s action.
  • Technical sellers could take action if GBP/USD slumps below 1.2700.

GBP/USD benefited from the selling pressure surrounding the US Dollar (USD) and closed the day in positive territory on Thursday. Although the pair manages to hold above 1.2700 in the European session on Friday, it struggles to extend its recovery ahead of key inflation data from the US.

The US Bureau of Economic Analysis (BEA) announced on Thursday that it revised the annualized Gross Domestic Product (GDP) growth for the first quarter lower to 1.3% from 1.6% in the first estimate. The benchmark 10-year US Treasury bond yield turned south and lost more than 1% on the day after the GDP data, causing the USD to stay weak against its major rivals.

British Pound PRICE This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the weakest against the Swiss Franc.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   0.10% 0.17% 0.13% -0.09% -0.22% -0.23% -0.94%
EUR -0.10%   0.04% 0.05% -0.20% -0.39% -0.42% -1.02%
GBP -0.17% -0.04%   -0.06% -0.27% -0.42% -0.40% -1.09%
JPY -0.13% -0.05% 0.06%   -0.25% -0.36% -0.26% -1.10%
CAD 0.09% 0.20% 0.27% 0.25%   -0.15% -0.13% -0.91%
AUD 0.22% 0.39% 0.42% 0.36% 0.15%   0.05% -0.67%
NZD 0.23% 0.42% 0.40% 0.26% 0.13% -0.05%   -0.73%
CHF 0.94% 1.02% 1.09% 1.10% 0.91% 0.67% 0.73%  

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).

The BEA will publish the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s (Fed) preferred gauge of inflation, for April later in the day. Investors will pay close attention to the monthly core PCE Price Index reading, which excludes volatile food and energy prices and doesn’t get distorted by base effects.

Markets expect the core PCE Price Index to rise 0.3% in April, matching March’s increase. According to the CME FedWatch Tool, the probability of a 25 basis points Fed rate cut in September currently stands at about 50%. A monthly increase of 0.4%, or bigger, in the monthly core PCE Price Index could feed into expectations for a Fed policy hold in September and provide a boost to the USD. On the other hand, a smaller-than-forecast increase could weigh on the USD and open the door for a rebound in GBP/USD heading into the weekend.

GBP/USD Technical Analysis

The lower limit of the ascending regression channel coming from late April aligns as key support at 1.2700. A daily close below this level could attract technical sellers. In this scenario, the 20-day Simple Moving Average (SMA) could be seen as the next bearish target at 1.2650 before 1.2630 (100-day SMA).

On the upside, resistances are located at 1.2760-1.2770 (Fibonacci 78.6% retracement of the latest downtrend, mid-point of the ascending regression channel) and 1.2800 (psychological level, static level).

Pound Sterling FAQs

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, aka ‘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).

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.

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.

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.

 

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