The State of GBP/USD in the European Session
- GBP/USD trades in a tight range near 1.2500 in the European session on Friday.
- Pound Sterling could have a difficult time staging a rebound after BoE policy announcements.
- The risk-averse market atmosphere could put additional weight on the pair’s shoulders.
As we delve into the realm of GBP/USD trading, we witness a scenario where the pair is locked in a tight range near 1.2500 during the European session on Friday. Following a more than 1% loss on Wednesday, GBP/USD continued its downward slide on Thursday, reaching its lowest level since early May near 1.2470 in the Asian trading hours on Friday. However, a slight recovery pushed the pair back to the 1.2500 area in the European session.
British Pound Price Performance This Week
The table below displays the percentage change of the British Pound (GBP) against major currencies this week, with the Pound being the weakest against the US Dollar:
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.15% | 0.95% | 1.99% | 1.07% | 2.02% | 2.29% | 0.32% |
The heat map indicates the percentage changes of major currencies against each other, providing valuable insights into currency performance dynamics.
Bank of England Policy Impact on Pound Sterling
After the December meeting, the Bank of England (BoE) kept its bank rate at 4.75%, as anticipated. However, a dovish turn saw three members of the Monetary Policy Committee (MPC) voting for a 25 basis points rate cut. The BoE’s policy statement highlighted heightened uncertainty in the economy, stating that the timing and magnitude of rate cuts in 2025 cannot be committed to. This led to bearish pressure on Pound Sterling following the BoE’s announcements.
Amid a negative shift in risk sentiment on Friday, GBP/USD struggled to gain recovery momentum. With concerns over a potential US government shutdown looming, cautious investor behavior prevailed. This sentiment was reflected in US stock index futures, which exhibited losses between 0.6% and 1% on the day. If safe-haven flows persist, the pair may face further downward pressure heading into the weekend.
Additionally, data from the UK’s Office for National Statistics revealed that Retail Sales in November rose by 0.2% on a monthly basis, falling short of the expected 0.5% increase.
Later in the day, the US Bureau of Economic Analysis is set to release the Personal Consumption Expenditures (PCE) Price Index data for November, the outcome of which is likely to influence market sentiment.
GBP/USD Technical Analysis
Technical analysis indicates that the Relative Strength Index (RSI) on the 4-hour chart hovers slightly above 30, suggesting a potential further downside for GBP/USD before a corrective move. Key support levels to watch include 1.2480, 1.2400, and 1.2340. On the upside, resistance levels at 1.2550 and 1.2600 are significant.
Pound Sterling FAQs
Here are some frequently asked questions related to Pound Sterling:
- FAQ 1: The Pound Sterling (GBP) is the oldest currency in the world, being the official currency of the United Kingdom since 886 AD. It is the fourth most traded currency for foreign exchange, with key trading pairs including GBP/USD, GBP/JPY, and EUR/GBP.
- FAQ 2: The value of Pound Sterling is heavily influenced by the monetary policy decisions of the Bank of England, which aims for price stability through interest rate adjustments.
- FAQ 3: Economic data releases such as GDP, PMIs, and employment figures play a crucial role in determining the strength of the Pound Sterling.
- FAQ 4: The Trade Balance indicator is another important data point for Pound Sterling, reflecting the difference between exports and imports.