GBP/USD rose during the North American session on Thursday amid improving risk appetite following a trade-war lull between the US and Europe. Meanwhile, traders ignored strong US data, which failed to weaken the US dollar (USD) despite indicating economy strength. At the time of writing, the pair is trading at 1.1357, up 0.24%.
Sterling gains as trade tensions ease as strong US data keeps dollar under pressure
On Wednesday, US President Donald Trump announced he had reached an agreement with NATO regarding Greenland, avoiding imposing tariffs on eight European countries and preventing an escalating trade war.
Back to economic data, the US Bureau of Economic Analysis revealed Q3 2025 GDP data, which grew by 4.4% year-on-year, higher than the forecast of 4.3%. The economy grew due to strong exports and a reduction in reserves.
Jobs data showed that fewer Americans filed for unemployment benefits last week, according to the Labor Department. US initial jobless claims reports for the week ending January 17 rose to 200K, down slightly from 199K the previous week and below the forecast of 212K. Continuous claims fell to 1.849 million last week, the lowest since November.
Following the release of the data, the US Dollar Index (DXY) fell 0.25% to 98.55. Expectations for further rate cuts by the Federal Reserve (Fed) remain persistent, with traders eyeing a further rate cut of 42 basis points by the end of the year.
Across the pond, Britain’s economic document was absent, yet previously released data showed inflation rising. In contrast, the latest jobs report was softer than economists expected, which would warrant lower interest rates by the Bank of England.
Earlier this week, the UK Economic Dock will feature retail sales for December. In the US, consumer sentiment is expected as well as the S&P Global Flash PMI by the University of Michigan.
GBP/USD Price Forecast: Technical Outlook
Despite reaching a two-day high of 1.3475, GBP/USD remains consolidated within familiar levels. Although buyers are gaining momentum as measured by the Relative Strength Index (RSI), it remains below its latest peak.
If GBP/USD breaks the January 20 high of 1.3492, the pair could challenge 1.3500, increasing the chances for buyers to see higher prices. Once those levels are taken, the next resistance will be the January 6 high at 1.3567.
Conversely, if GBP/USD drops below the 200-day SMA at 1.3406, the next support will be the 50-day SMA at 1.3341.
Pound Sterling FAQ
Pound Sterling (GBP) is the world’s oldest currency (886 AD) and the official currency of the United Kingdom. According to 2022 data, it is the fourth most traded entity for foreign exchange (FX) in the world, accounting for 12% of all transactions, an average of $630 billion per day. Its leading trading pairs are GBP/USD, also known as ‘cable’, which accounts for FX, GBP/JPY, or ‘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 affecting the value of the pound sterling is the monetary policy set by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a stable inflation rate of around 2%. Its primary tool to achieve this is adjustment of interest rates. When inflation gets too high, the BOE will try to rein it in by raising interest rates, making it more expensive for people and businesses to get loans. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to put their money. When inflation becomes very low it is a sign that economic growth is slowing down. In this scenario, the BoE would consider lowering interest rates to make credit cheaper so that businesses would borrow more to invest in growth-generating projects.
Data releases reveal the health of the economy and can impact the value of the pound sterling. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of GBP. A strong economy is good for sterling. This not only attracts more foreign investment but it could also encourage the BOE to raise interest rates, which would directly strengthen the GBP. Otherwise, if economic data is weak, the pound sterling is likely to fall.
Another important 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 during a given period. If a country produces highly demanded exports, its currency will benefit from the additional demand generated from foreign buyers wishing to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.
