Key Moments
- GBP/USD trades just under 1.3500 as a weaker US Dollar and lower US Treasury yields provide support.
- The 20-day Exponential Moving Average near 1.3550 acts as a technical barrier, keeping the short-term bias slightly to the downside.
- Traders are watching upcoming US PPI data and a speech by BoE Chief Economist Huw Pill for guidance on monetary policy.
GBP/USD Gains as US Yields Fall
The Pound Sterling (GBP) is trading slightly higher against the US Dollar (USD), hovering near 1.3500 during Friday’s European session. This comes as the US Dollar weakens, helped by falling Treasury yields.
Yields on 10-year US government bonds have dropped toward 4%, their lowest level in over a year. Consequently, the Greenback has softened, giving the Pound some lift.
The US Dollar Index (DXY), which tracks the Dollar against six major currencies, is down 0.2%, trading near 97.60.
Macro Focus: US PPI and BoE Comments
Investors are focusing on the US Producer Price Index (PPI) release for January, scheduled at 13:30 GMT on Friday. This report may offer fresh insight into inflation trends and shape expectations for future Federal Reserve decisions.
Meanwhile, the Pound has gained only modestly versus the Dollar, underperforming other major currencies. This reflects market expectations that the Bank of England (BoE) may cut interest rates in its March policy meeting.
BoE Chief Economist Huw Pill will speak at 13:00 GMT. His remarks could influence expectations about the timing and size of any rate changes.
Technical Picture: 20-Day EMA Caps GBP/USD
GBP/USD is around 1.3492 at the time of writing. The outlook is neutral, with a mild bearish bias, as the pair trades just below the 20-day Exponential Moving Average near 1.3550.
The 14-day Relative Strength Index (RSI) hovers near 40. Momentum is subdued, and a clearer signal may emerge only if the RSI moves decisively below this level.
| Level | Type | Description |
|---|---|---|
| 1.3830 | Resistance | January high |
| 1.3680 | Resistance | Upside target if 20-day EMA breaks |
| 1.3550 | Resistance | 20-day EMA |
| 1.3492 | Spot | GBP/USD current level |
| 1.3434 | Support | February 19 low and recent troughs |
| 1.3360 | Support | Next downside if 1.3434 breaks |
Initial resistance is the 20-day EMA around 1.3550. A daily close above this level could clear the path toward 1.3680 and then 1.3830. On the downside, support sits at 1.3434. A sustained break there may open the door to 1.3360.
Background: Pound Sterling and Key Drivers
What is the Pound Sterling?
The Pound Sterling (GBP) is the oldest currency in the world (since 886 AD) and the official currency of the United Kingdom. It is the fourth most traded currency in the FX market, accounting for 12% of transactions, with an average daily volume of $630 billion (2022).
Its main trading pairs are GBP/USD (‘Cable’, 11% of FX), GBP/JPY (‘Dragon’, 3%), and EUR/GBP (2%). The Pound is issued by the Bank of England (BoE).
How BoE Decisions Affect the Pound
The most important factor influencing GBP is the BoE’s monetary policy. The bank targets price stability, aiming for roughly 2% inflation. Interest rates are its main tool.
When inflation is high, the BoE raises rates to make borrowing more expensive. This attracts global investors, which is positive for GBP. When inflation is low, the BoE may cut rates to stimulate growth, generally weakening the Pound.
Economic Data and the Pound
Data such as GDP, manufacturing and services PMIs, and employment reports can influence GBP. Strong data attracts investment and may push the BoE to raise rates, strengthening GBP. Weak data has the opposite effect.
Trade Balance Impact
The Trade Balance, measuring exports minus imports, is another key driver. A positive balance strengthens GBP as foreign buyers seek UK goods. A negative balance weakens the currency.
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