- GBP/USD shed 0.4% on Thursday, tapping a fresh half-year low.
- A thin calendar on the UK side saw the Pound Sterling give up ground.
- Cable traders are buckling in for Friday’s dense data schedule.
GBP/USD shed another four-tenths of a percent on Thursday, tapping the pair’s lowest bids in six months as the Pound Sterling’s underlying weakness drags the pair further into the low end against the Greenback. Market pressures are coiling ahead of Friday’s key prints that are due on both sides of the pond to wrap up an otherwise low-impact week.
Friday will kick off with an early print of UK Retail Sales figures for October. UK Retail Sales are expected to contract by 0.3% MoM compared to September’s 0.3%. On an annualized basis, UK Retail Sales growth is forecast to ease to 3.4% YoY from the previous 3.9%.
Global Purchasing Managers Index (PMI) business activity figures will release on Friday on a rolling schedule, with PMI figures due on both sides of the Atlantic. UK Manufacturing PMI survey results for November are expected to hold steady at 49.9, just beneath the contraction cutoff level, while UK Services PMI numbers are forecast to tick upwards to 52.1 from 52.0.
Median market forecasts for the US side of Friday’s PMI release schedule call for a general upswing in activity expectations, with November’s US Manufacturing PMI expected to rise to 48.8 from 48.5. The Services PMI component is likewise forecast to increase to 55.3 from 55.0.
GBP/USD price forecast
The GBP/USD daily chart reveals a bearish narrative as the pair continues its downward trajectory, trading around 1.2590. The price action has remained below the 50-day (blue) and 200-day (black) Exponential Moving Averages (EMAs), confirming a death cross pattern formed earlier, which signals prolonged downside momentum. The pair is testing a key support zone near 1.2590, a level that coincides with previous consolidation in May. A decisive breakdown below this region could open the door to further losses toward 1.2500, where psychological support might offer temporary respite.
The MACD indicator at the bottom underscores the bearish sentiment, with the MACD line extending below the signal line, maintaining a downward slope. Additionally, the histogram remains in negative territory, albeit showing minor signs of tapering momentum. This suggests potential consolidation in the near term before the next decisive move. On the flip side, for the bulls to regain control, a recovery above the 50-day EMA at 1.2925 would be critical, with further resistance seen near 1.3000. Traders should monitor developments around the support and EMA levels closely, as they could determine the pair’s medium-term direction.
GBP/USD daily chart
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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