GBP/USD inches higher after registering modest losses in the previous day, trading around 1.3230 during the Asian hours on Friday. Trading activity may remain subdued due to the Good Friday holiday.
The Pound Sterling (GBP) receives some support as markets are pricing in two Bank of England rate hikes in 2026 amid rising energy prices and inflation concerns. However, BoE Governor Andrew Bailey recently warned that expectations may be overstated.
However, the upside of the GBP/USD pair could be limited as the US Dollar (USD) could gain ground amid rising safe-haven demand following the recent Iran threats from US President Donald Trump.
US President Donald Trump offered no clarity on steps toward reopening the Strait of Hormuz, warning of intensified military action over the next two to three weeks and issuing strong threats against Iran. Iran’s Foreign Minister Abbas Araghchi responded that recent US strikes on civilian infrastructure would not force a retreat, describing them instead as evidence of an opponent in disarray and moral decline.
Chicago Fed President Austan Goolsbee expressed concern over rising oil prices, noting they could complicate efforts to curb inflation, particularly if gasoline costs surge and lift inflation expectations.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data.
Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates.
When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money.
When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP.
A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Source: https://www.fxstreet.com/news/pound-sterling-edges-higher-as-traders-price-in-two-boe-rate-cut-odds-202604030338
