- GBP/USD struggles to hold above 1.2900 in the European session on Thursday.
- The US economic docket will feature weekly Initial Jobless Claims and Q2 GDP data.
- The negative shift seen in risk mood could continue to limit the pair’s upside.
GBP/USD failed to make a decisive move in either direction and closed virtually unchanged on Wednesday. As safe-haven flows dominate the financial markets on Thursday, the pair struggles to gain traction and trades slightly below 1.2900.
Investors grow increasingly concerned over a gloomy economic outlook as the People’s Bank of China (PBoC) unexpectedly loosened its policy for the second time this week. Following the decision to lower the one-year and five-year Loan Prime Rates by 10 basis points earlier in the week, the PBoC announced on Thursday that it cut the one-year Medium-term Lending Facility (MLF) rate from 2.50% to 2.30%.
Reflecting the risk-averse market atmosphere, the UK’s FTSE 100 Index is down nearly 1% in the European session. Meanwhile, Nasdaq futures and S&P 500 futures were last seen losing 0.4% and 0.2%, respectively.
In the second half of the day, the US Bureau of Economic Analysis will release its first estimate of the Gross Domestic Product (GDP) growth for the second quarter. Markets expect the US’ GDP to expand at an annual rate of 2% following the 1.4% growth recorded in the previous quarter. In case the GDP reading arrives below analysts’ estimates, the USD could have a hard time finding demand in the early American session. Nevertheless, GBP/USD’s upside is likely to remain capped if Wall Street’s main indexes open in the red and stretch lower.
The US economic docket will also feature the weekly Initial Jobless Claims, which is forecast to decline to 238,000 from 243,000 last week.
GBP/USD Technical Analysis
GBP/USD holds slightly above 1.2880, where the Fibonacci 38.2% retracement level of the latest uptrend and the 100-period Simple Moving Average (SMA) are located. In case this support level fails, 1.2830 (Fibonacci 50% retracement) and 1.2800-1.2790 (psychological level, 200-period SMA) could be seen as next bearish targets.
On the upside, 1.2900 (20-period SMA, psychological level, static level) aligns as immediate resistance ahead of 1.2940-1.2950 (Fibonacci 23.6% retracement, 50-period SMA).
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, aka ‘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).
Analysis: The GBP/USD pair is facing challenges amid a gloomy economic outlook and risk aversion in the financial markets. With the PBoC’s policy easing and concerns over US GDP growth, investors are cautious. Technical analysis shows key support and resistance levels for GBP/USD. Understanding the factors influencing Pound Sterling value, such as monetary policy, economic data releases, and trade balance, can help individuals make informed decisions about their finances and investments.