GBP/USD Price Forecast: Declines below 1.3550, while maintaining bullish bias above 100-day SMA
- GBP/USD loses ground to near 1.3545 in Tuesday’s early European session.
- The pair keeps a bullish vibe above the 100-day SMA, but further consolidation cannot be ruled out with neutral RSI.
- The immediate resistance level emerges at 1.3550; the initial support level to watch is 1.3526.
The GBP/USD pair trades in negative territory around 1.3545 during the early European trading hours on Tuesday. Federal Reserve (Fed) Chair Kevin Warsh’s hawkish remarks at the Jackson Hole symposium underpin the US dollar (USD) against the British Pound (GBP).
Warsh said on Friday during his first Jackson Hole speech that with inflation “running above our 2 percent target, the Fed’s predominant focus right now should be ’that underlying inflation is moving to our objective, clearly, and at sufficient speed … otherwise, we have work to do.”
Expectations of a September Fed rate hike rose to 65.4% from below 40%, according to the CME FedWatch tool. Economists said the key determinant could be what the next round of inflation data reveals.
BoE tightening expectations build as markets eye UK budget
Strategists at Scotiabank highlight that market pricing has turned more constructive on BoE tightening prospects, with investors currently assigning “a ~60% chance of a 25bpt at the next BoE meeting on September 16” and “a cumulative 36bpts of tightening by year-end.” They add that, in terms of sentiment, “the October 28 budget” will be crucial, noting it “will remain a key focus for markets over the next coupld of months” as investors assess the UK’s fiscal stance alongside the evolving policy outlook.
Warsh flags unfinished inflation fight, keeps Dollar bulls alert
Fed Chair Warsh delivered a notably hawkish-leaning message, with a 7.4/10 FXS Speechtracker score standing above the 6.5/10 historical average and underscoring elevated concern on price stability. The insistence that the Fed must be “confident underlying inflation is moving to objective, or we have work to do,” combined with the view that financial conditions are not restrictive and credit markets show few signs of policy restraint, points to a bias toward further tightening or at least a higher-for-longer stance. Warsh’s emphasis that recent better inflation prints do not yet signal a meaningful change in underlying trends, alongside a firm commitment to the 2% PCE target, reinforces a tone that is supportive for the Dollar and broadly negative for risk-sensitive assets.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 129.70, which keeps the policy narrative firmly in hawkish territory despite the lack of incremental shift. The combination of a stronger-than-baseline FXS Speechtracker score and a high FXS Fed Sentiment Index level suggests markets will continue to price persistent Fed vigilance on inflation, with implications for Dollar strength and higher front-end yields.
Technical Analysis: GBP/USD retains a bullish vibe above the 100-day SMA
In the daily chart, GBP/USD sits above both the 100-day moving average (MA) and the lower Bollinger Band, keeping the near-term bias mildly bullish as price holds within the upper half of the recent volatility envelope. The Relative Strength Index (14) reading around 52 suggests neutral-to-positive momentum, hinting that buyers retain a slight advantage but lack strong conviction.
On the topside, initial resistance is located at the Bollinger middle band around 1.3550, followed by the upper Bollinger Band at 1.3668. A sustained break would open the way for 1.3700, representing the February 9 high and psychological level.
On the downside, first support is seen at the August 28 low of 1.3526. The next contention level is located at the 100-day MA near 1.3445, with the lower Bollinger Band at 1.3432 reinforcing this demand area; a daily close below this zone would weaken the current constructive tone and expose deeper losses within the broader range.
(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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