GBP/USD Price Forecast: Strengthens above 1.3550, upside bias intact while holding above 100-day SMA
- GBP/USD gains ground to near 1.3550 in Wednesday’s early Asian session.
- The constructive outlook of the pair remains intact above the 100-day SMA.
- The immediate resistance level emerges at 1.3560; the first downside target to watch is 1.3465.
The GBP/USD pair trades in positive territory around 1.3550 during the early European trading hours on Wednesday. UK Chancellor John Healey unveiled a series of measures designed to encourage economic growth and draw more private investment into the UK. This move provides some support to the British Pound (GBP) against the US Dollar (USD).
UK Chancellor on Monday announced plans to give city regions greater powers to attract private investment as part of Prime Minister Andy Burnham's plan to devolve power away from central government. Healey also stressed his commitment to fiscal discipline and to curbing rising costs for business and the public, including a 25% reduction in regulatory costs by the next election due in 2029.
The Bank of England (BoE) is expected to hold the interest rate at 3.75% for the rest of the year and through at least mid-2027, according to a Reuters poll. BoE Governor Andrew Bailey said on Tuesday he wanted to dispel the idea that it's just a matter of time before the central bank hikes interest rates, rather than a possibility that hinges on economic and geopolitical developments.
GBP upside bias builds but UOB keeps Pound in broad range
Analysts at UOB Group note that GBP/USD was confined to a relatively tight band at the end of last week, with the Pound “traded between 1.3482 and 1.3550 last Friday and closed little changed at 1.3518 (-0.05%).” They recall that “the price action did not lead to any shift in either downward or upward momentum,” and had expected GBP “to trade in a range between 1.3490 and 1.3540.” In the event, the pair “did not quite trade within the expected range, as it edged up from 1.3508 to 1.3547.”
While UOB still sees “no significant increase in upward momentum,” the bank judges that “the bias for GBP today appears tilted to the upside, likely toward 1.3565,” though it “do[es] not expect the major resistance at 1.3600 to come into view.” On the downside, the strategists flag that “a breach of 1.3520 (minor support is at 1.3530) would mean that the upside bias has faded.”
From a broader perspective, UOB reiterates that “there is not much to add” to its recent medium-term assessment, with GBP “neutral now and it is likely to trade between 1.3480 and 1.3600” over the next one to three weeks.
Technical Analysis: GBP/USD retains a bullish tone above the 100-day SMA
In the daily chart, GBP/USD holds a mild bullish bias as price remains above the 100-day Simple Moving Average (SMA) and the lower Bollinger Band, suggesting underlying demand on dips. However, spot is now just under the Bollinger mid-line, which acts as immediate resistance, while the Relative Strength Index (RSI) near 54 points to steady but not overextended bullish momentum.
On the topside, a daily close above the Bollinger middle band at 1.3560 would open the way toward the upper band resistance near 1.3660. Further north, the next hurdle to watch is the 1.3700 psychological level.
On the downside, initial support is seen at the lower Bollinger Band around 1.3465, ahead of stronger structural backing from the 100-day SMA at 1.3445, where buyers would be expected to defend the broader upbeat tone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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, 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).
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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