The Pound Sterling’s Recovery Against the US Dollar
The Pound Sterling (GBP) has shown resilience as it extended its recovery from 14-month lows of 1.2100 against the US Dollar (USD), with GBP/USD testing offers above 1.2400. This recovery has been driven by a combination of factors that have influenced both currencies and the overall market sentiment.
Factors Driving the GBP/USD Pair
- US President Donald Trump’s tariff talks have been a key market driver, affecting risk sentiment and the performance of the US Dollar.
- Uncertainty over Trump’s tariff policy and calls for lower interest rates have led to a decline in confidence in the USD.
- Trump’s announcement of tariffs on imports from various countries, including China and the EU, has added to the market’s uncertainty.
- The formation of a joint venture called Stargate by OpenAI, SoftBank, and Oracle to invest in artificial intelligence has boosted tech stocks globally, impacting the USD.
- Expectations of rate cuts by the Federal Reserve have kept the USD under pressure, benefiting the GBP/USD pair.
UK Economic Indicators
- UK’s wage growth has supported the Pound Sterling’s recovery, despite a slight increase in the Unemployment Rate.
- The Office for National Statistics reported a rise in Average Weekly Earnings, contributing to the positive sentiment around the GBP/USD pair.
- The S&P Global/CIPS UK Services Business Activity Index indicated a growth in January, providing additional support for the Pound Sterling.
Upcoming Market Catalysts
Traders will be closely watching high-impact US economic data releases and policy announcements for further direction in the GBP/USD pair in the upcoming week. Key events include:
Event Calendar
- Official Chinese PMI data on Monday, impacting risk-sensitive currencies like the British Pound.
- BoE Quarterly Bulletin and US Durable Goods Orders on Tuesday.
- Fed policy announcements and press conference on Wednesday, influencing interest rate expectations.
- US fourth-quarter GDP data and other economic indicators on Thursday, adding to market volatility.
- US Personal Consumption Expenditure Price Index and Employment Cost Index on Friday, wrapping up the week.
Technical Analysis of GBP/USD
The technical outlook for the GBP/USD pair shows potential for further recovery but with caution:
- The pair is testing the upper boundary of a falling wedge formation, with resistance at 1.2425.
- A daily closing above the 21-day Simple Moving Average at 1.2362 could signal a move towards the 50-day SMA at 1.2525.
- A Bear Cross scenario could emerge if the 100-day SMA crosses below the 200-day SMA, leading to a downside towards support levels.
Overall, the GBP/USD pair’s performance will be influenced by a combination of economic data, policy announcements, and market sentiment, making it a dynamic pair to watch in the coming week.