.jpg)
- The GBP/USD pair jumped above the 1.3200 level amid broad-based weakness in the US currency in the market.
- The Federal Reserve has given its nod to an imminent interest rate cut, sending risk appetite through the roof.
- Next week: UK holiday Monday, US GDP, PCE inflation.
GBP/USD Gold saw a rally supported by the Federal Reserve’s decision on Friday, rising about 1% during today’s trading and closing the week with a seventh consecutive bullish daily candle as the US dollar fell broadly.
Predicting the next week: Recession fears dominate Fed easing
According to CME’s FedWatch tool, interest rate markets are pricing in a two-way cut on September 18 by about three to one, with the rest of the Fed committed to a single quarter-basis-point cut. Bets on an inaugural 50 basis-point rate cut in September spiked after the Fed announced a 50 basis-point rate cut in September. Chairman Jerome PowellSpeaking at the Jackson Hole Economic Symposium on Friday, the Fed chairman frankly admitted that it is finally time for the U.S. central bank to start pushing benchmark interest rates lower.
Looking ahead: UK bankers take a break, US PCE inflation figures loom
Next week, cable traders will want to keep an eye on the upcoming UK bank holiday on Monday. Over the rest of the week, UK economic data will remain limited, although financial markets will pay more attention to US GDP growth and personal data. Consumption expenses Consumer Price Index (PCE) inflation figures are due out later next week.
Sterling price this week
The table below shows the percentage change in the British Pound (GBP) against the major currencies listed this week. The British Pound was the strongest against the US Dollar.
| US Dollar | euro | GBP | JPY | Almost | Australian Dollar | New Zealand Dollar | Swiss Franc | |
|---|---|---|---|---|---|---|---|---|
| US Dollar | -1.49% | -2.07% | -2.24% | -1.27% | -1.85% | -3.05% | -2.04% | |
| euro | 1.49% | -0.65% | -0.73% | 0.24% | -0.45% | -1.74% | -0.58% | |
| GBP | 2.07% | 0.65% | -0.29% | 0.81% | 0.14% | -1.08% | 0.08% | |
| JPY | 2.24% | 0.73% | 0.29% | 0.95% | 0.37% | -0.68% | 0.08% | |
| Almost | 1.27% | -0.24% | -0.81% | -0.95% | -0.62% | -1.72% | -0.82% | |
| Australian Dollar | 1.85% | 0.45% | -0.14% | -0.37% | 0.62% | -1.10% | -0.10% | |
| New Zealand Dollar | 3.05% | 1.74% | 1.08% | 0.68% | 1.72% | 1.10% | 1.12% | |
| Swiss Franc | 2.04% | 0.58% | -0.08% | -0.08% | 0.82% | 0.10% | -1.12% |
The heat map shows the percentage changes in major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select GBP from the left column and scroll along the horizontal line to USD, the percentage change displayed in the box will be GBP (base)/USD (quote).
GBP/USD Price Forecast
cable table The move has been remarkably one-sided this week, with GBP/USD steadily rising from Monday’s opening bids near 1.2950. The pair is up more than 2.1% this week in a strong chart rally, extending the recovery bid from the August lows to 1.2665.
The GBP/USD pair hit a 29-month high on Friday, and the pair has gained 28% since hitting all-time lows in Q3 2022. The current GBP bull run shows no signs of exhaustion, and the pair has closed in the green for all but one of the 11 consecutive trading days, marking a stunning rally on the chart.
GBP/USD 4-hour chart
GBP/USD Daily Chart
Frequently Asked Questions About Sterling
The British pound (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 in the world’s foreign exchange (FX) market, accounting for 12% of all transactions, with an average of $630 billion per day, according to 2022 data. The main trading pairs are GBP/USD, also known as the “cable”, which accounts for 11% of the FX market, GBP/JPY, or “the dragon” as traders know it (3%), and EUR/GBP (2%). The pound sterling is issued by the Bank of England (BoE).
The most important factor that affects the value of the pound is the monetary policy set by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary goal of “price stability” – a stable inflation rate of around 2%. Its primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it harder for people and businesses to access credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England will consider cutting interest rates to reduce credit so that businesses will borrow more to invest in growth-generating projects.
Data released measures the health of the economy and can affect the value of the pound. Indicators such as GDP, manufacturing and service PMIs, and employment can all influence the direction of the pound. A strong economy is good for the pound. Not only does it attract more foreign investment, it may encourage the Bank of England to raise interest rates, which would directly boost the pound. Otherwise, if economic data is weak, the pound is likely to fall.
Another important piece of data relating to the pound is the trade balance. This measure measures the difference between what a country earns from its exports and what it spends on imports over a given period of time. If a country produces highly demanded exports, its currency will benefit purely from the additional demand generated by foreign buyers seeking to purchase these goods. Thus, a positive net trade balance strengthens the currency and vice versa for a negative balance.
