GBP/USD Price Forecast: Holds steady to near 1.3600, with bullish bias intact above 100-day SMA
- GBP/USD flatlines near 1.3590 in Friday’s early European session.
- The constructive outlook of the pair remains intact above the 100-day SMA, with bullish RSI momentum.
- The first upside barrier emerges at 1.3655; the initial support level to watch is 1.3570.
The GBP/USD pair steadies around 1.3590 during the early European session on Friday. Traders pared expectations for an interest rate hike by the Bank of England (BoE) this year and shifted their attention to the annual symposium on monetary policy at Jackson Hole in the US later on Friday.
Traders await the Federal Reserve (Fed) Chair Kevin Warsh's speech at the Jackson Hole symposium for clues on his policy outlook. This event could provide more clarity on his outlook for the US economy, interest rate outlook, and how the US central bank will bring inflation back to the Fed’s 2% target. Any hawkish comments from Fed officials could help limit the Greenback’s losses in the near term.
On the UK’s front, markets now expect the BoE to hike interest rates by 24.7 basis points by December, meaning they no longer expect a 25-bp hike by the UK central bank this year, according to LSEG data. This reflected that markets were slowly coming into alignment with most economists, who have long said in Reuters polls that the BoE is likely to hold rates steady this year.
GBP consolidation expected after recent slide
Strategists at UOB Group note that GBP/USD has extended its recent slide, with the Pound “falling to a low of 1.3571 yesterday” before finishing the session almost flat, as “GBP closed little changed at 1.3594 (-0.03%).” They highlight that “oversold conditions, combined with slowing momentum suggest that instead of continuing to decline today, GBP is more likely to trade in a range of 1.3570/1.3620,” pointing to a period of consolidation rather than a continuation of the sharp decline seen earlier in the week.
Collins downplays inflation surprise, keeping Dollar bulls cautious
Fed’s Collins delivered a mildly less hawkish tone than usual, with the FXS Speechtracker score at 4.8/10 compared to the established baseline of 5.7/10, signaling reduced urgency for additional tightening. The emphasis that current policy is already restrictive and should drive “gradual disinflation,” alongside the view that portfolio management fees temporarily distorted headline inflation while market-based prices track closer to target, frames the latest data as a bump rather than a regime shift. Collins also characterized the recent rise in bond yields as consistent with price stability and suggested that, absent fresh tariff or oil shocks, inflation should ease, which tempers immediate upside for the Dollar.
The FXS Fed Sentiment Index fell 2.44 points to 129.11, indicating a pullback in perceived hawkishness even as the gauge remains firmly above the neutral 100 mark. This configuration signals that, while the Fed stance is still hawkish in aggregate, Collins’ remarks contribute to a softer edge in policy expectations, aligning with the lower FXS Speechtracker score.
Technical Analysis: GBP/USD keeps a bullish vibe above the 100-day SMA
In the daily chart, GBP/USD maintains a constructive bullish bias while holding above both the 100-day Simple Moving Average (SMA) and the 20-day Bollinger middle band, indicating underlying demand on shallow pullbacks. The Relative Strength Index (14) at 59.7 leans to the topside without yet signaling overbought conditions, suggesting buyers still have room to extend the advance, although price is already edging closer to the upper end of its recent volatility envelope.
On the topside, initial resistance is located at the August 25 high of 1.3655. The next hurdle is located at the 20-day Bollinger upper band near 1.3680, where the recent bullish swing could start to meet profit-taking.
On the downside, immediate support is seen at the August 27 low of 1.3570. The next contention level to watch is the mid-Bollinger band around 1.3540, followed by the 100-day SMA at 1.3445 and then the lower Bollinger band near 1.3405, levels that together define a broad demand zone that would need to give way to undermine the current bullish structure.
(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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