GBP/USD Analysis in the European Session
- GBP/USD trades slightly below 1.3000 in the European session on Tuesday.
- Key support area seems to have formed in the 1.2950-1.2960 area.
- BoE Governor Bailey will deliver a speech later in the session.
After a two-day recovery, GBP/USD turned south on Monday, experiencing a 0.5% loss. Currently, the pair is struggling to gain recovery momentum and is trading slightly below 1.3000.
Market Overview
Markets are exhibiting caution at the beginning of the week due to escalating geopolitical tensions in the Middle East. This situation has led to a surge in safe-haven demand for the US Dollar (USD), affecting currency pairs like GBP/USD.
If Wall Street opens bearishly and major equity indexes continue to slide, the USD is likely to maintain its strength, putting pressure on GBP/USD to move lower.
The US economic calendar for today features the release of the Richmond Fed Manufacturing Index data for October. However, this data is not expected to have a significant impact on the market.
Upcoming Event
In the American session, Bank of England (BoE) Governor Andrew Bailey is scheduled to deliver a keynote address at the Bloomberg Global Regulatory Forum in New York. While Bailey is unlikely to discuss the policy outlook, this event may not greatly influence the valuation of Pound Sterling. The next key data release for GBP/USD will be S&P Global’s preliminary October Manufacturing and Services Purchasing Managers Index (PMI) data for the UK and the US on Thursday.
Technical Analysis
GBP/USD is currently trading within a descending regression channel since late September. The Relative Strength Index (RSI) indicator on the four-hour chart is below 50, indicating a bearish bias.
Key technical levels to watch:
- Strong support area at 1.2950-1.2960, including the lower limit of the descending channel and the 100-day Simple Moving Average (SMA)
- Resistance levels at 1.3050, 1.3090-1.3100, and 1.3140
Pound Sterling FAQs
Here are some frequently asked questions about Pound Sterling (GBP) and its impact on the financial market:
1. What is Pound Sterling?
The Pound Sterling is the official currency of the United Kingdom, dating back to 886 AD. It is one of the most traded currencies globally, accounting for 12% of foreign exchange transactions.
2. What influences the value of Pound Sterling?
The value of Pound Sterling is primarily influenced by monetary policy decisions made by the Bank of England. Interest rate adjustments and economic indicators play a significant role in determining the strength of GBP.
3. How do economic indicators impact Pound Sterling?
Economic data releases such as GDP, PMIs, and employment figures can affect the value of Pound Sterling. A strong economy attracts foreign investment and may lead to interest rate hikes, strengthening GBP.
4. What role does Trade Balance play in GBP valuation?
The Trade Balance, which measures a country’s exports and imports, can impact the value of Pound Sterling. A positive trade balance strengthens GBP, while a negative balance weakens it.