The Pound Sterling (GBP), introduced in 886 AD, is the oldest currency still in use today. Today, it sits in a rare moment of peace. The GBP, the fixed currency for the UK, has been hovering in a narrow band. During most of the day during the European trading session, it is hanging around 1.3550 with respect to the American Dollar. Investors are getting excited ahead of the scheduled meeting between US president Donald Trump and Ukrainian president Volodymyr Zelenskyy at the White House. This merge-up is a crystal clear sign of their expectation of new implications for worldwide markets.
As of October 2023, the Pound Sterling remains the fourth most traded currency in the foreign exchange (FX) market. Despite its popularity, it is currently responsible for only about 12% of all transactions. Recent statistics from 2022 suggest that the GBP has an average daily turnover of $630 billion. Perhaps most importantly, this underscores its critical role in sustainable international finance. The market is waiting with bated breath as the currency has kicked off the week on a firm note. The markets are most tuned in to the next big economic data points.
Economic Indicators and Market Sentiment
Market participants are champing at the bit for the release of the United Kingdom’s Consumer Price Index (CPI) data for July on Wednesday. While they await this information, mood regarding the Pound Sterling is cautiously upbeat. Economists forecast that the UK core CPI will remain at a growth rate of 3.7%. This highly awaited data release promises to shake up investor confidence and trading strategies alike.
These key trading pairs, in particular GBP/USD, often known as ‘Cable’, are 11% of total FX trades. Other big pairs are GBP/JPY, the ‘Dragon’, 3% of FX trade, and EUR/GBP, 2%. These are trading pairs that are critical for gauging the Pound’s performance against other major currencies.
Economists are bullish on GBP’s prospects against USD on a near-term basis. It remains well above the 20-day Exponential Moving Average (EMA), now just above 1.3460. Fundamentals and technical indicators support the continued upward trend. Incredibly, the 14-day Relative Strength Index (RSI) is trying to climb back above the all-important level of 60.00. A successful breach of this threshold would be a harbinger of new, bullish momentum for the Pound Sterling.
Technical Analysis and Market Outlook
Longs and shorts are both looking at important support and resistance levels in the trading range as their lines in the sand. The low of August 11 at 1.3400 marks an important support area for the Pound Sterling. If it does retest this level, actors in the market will be looking to see if this level is defended or if downward pressure continues to develop.
The consolidation in the 1.3550 area is a sign that traders are waiting on the sidelines. As such, they are holding their breath for big economic news and major geopolitical events. The upcoming Trump-Zelenskyy meeting is expected to attract attention due to its potential to influence market dynamics and investor sentiment.
As market analysts suggest, all the current signals point to a bullish trend for GBP/USD. They caution that outside forces such as global economic conditions and geopolitical events could affect the currency’s trajectory. Traders need to be aware of what’s going on at home and abroad. All of these factors could be big market movers for currencies in the days ahead.