How to Predict Currency Movement GBP/USD: History, News, Rates
GBP/USD, or British Pound against the US Dollar, is the oldest traded currency pair. Its history goes back to the middle of the 19th century when the first exchange rate was set. After World War II, when the Bretton-Woods system collapsed, both Pound and US Dollar became freely trading currencies.
GBP is also known as cable because the optic fiber cables unite the British Islands and America. Together with the US Dollar, the British Pound remains one of the world’s most safe and reliable currencies. That is why the trading volume for GBP/USD is usually high, as well as liquidity, and a Forex trader can make a good profit with it with a relatively low risk.
Which Events Can Affect GBP/USD Rate
While GBP/USD is one of the major currency pairs, all the influence factors can affect the currency price. A trader can use fundamental and technical analysis to forecast GBP/USD movements, though less traditional methods are also appropriate. Let us discuss the main factors that should be considered for the GBP/USD forecast.
Major Economic News
As a rule, the major economic news is closely related to the economics of the United States and the United Kingdom. For example, global GDP growth results from major economic activities, and if the growth rate is low, it means the economics are not doing well. For GBP/USD these news are always market makers.
Local Economic News
For both currencies, GBP, and USD, the forecast depends on the local economics. For example, CPI, or Customer Price Index, which shows the inflation rate, is a significant influence factor for GDP. A basic interest rate update from the Bank of England or the Fed also affects the GBP/USD rate. So, each update is important for a pair price.
Corporate News
The economic success of each country consists of the results of many national businesses. When a large company publishes a positive financial report, the national currency goes stronger. For example, the success of AstraZeneca on the pandemic background pushes almost all British economic indices up.
Monetary Policy
Every change in monetary policy and every update of the Federal Reserve or Bank of England provokes the volatility for GBP/USD. The most important update for Forex is the change of a basic interest rate. A basic central bank rate defines the credit rate in commercial banks and shows whether it is easy to get a credit or not. Knowing the schedule of future Central Banks Updates, creating the GBP/USD forecast, and opening some prospective trades is possible.
Technical Correlations
All technical factors can also affect the GBP/USD movement. For example, if the pair GBP/USD goes along the strong trend line, breaks the resistance level, and moves further by inertion, it means the inevitable rollout.
Political News
Major political news, especially related to the United Kingdom, can also affect the price of GDP to USD. The simple example is Brexit: since separation from the EU started, the Pound’s value dropped significantly against the US dollar.
What Is the Best Time for Trading GBP/USD
The broad time frame appropriate for GBP/USD trading is 6:00 am – 3:00 PM GMT. At 6:00 in the morning, before the London Exchange is open, traders start a preopening activity, and a trading volume grows. Then, at 10:00, the London Exchange opens, but the trading volume usually goes down. The reason is at this time many economically important news are released. The market should listen and process the news, and then the activity renews. So, the peak hours for GBP/USD trading are 8:00-10:00 am and 12:00-3:00 p.m. GMT.
How to Predict GDP/USD Fluctuations in Short-Term and Long-Term Perspective
Before starting the analysis, a trader should understand that forecasting is about probability. Almost all scenarios are possible on the market every day. So, the thousands of forecasts describe the potential situation, and each of them can become correct. There is plenty of disagreement among analysts. That’s normal.
So, a trader should train a skeptical view and a cold mind. There are countless methods and models used to forecast GBP/USD rates. The best choice is to try several and choose the most appropriate. From the very beginning, a trader should distinguish between bearish and bullish trends. For example, the bearish trend for GDP means the price will fall for a certain time. The bullish trend means the price will grow.
No source or analysts can reach certainty. Nevertheless, we can recommend some sources for GBP/USD forecasting.
GDP/USD Daily Forecast
To forecast GBP/USD fluctuations per day, it is necessary to monitor the Daily Economic Calendar. The important events are known as market movers, they can impact the market and push the pair up and down.
GDP/USD Weekly Forecast
During the week, the pair price moves within a certain price range. Of course, there are numerous ups and downs, but they mostly have a speculative nature. A trader can consider these movements as a noise. Correlation analysis would be the best method to predict the price movements within a week.
GDP/USD Monthly Forecast
The longer the time, the greater the chance of big moves in exchange rates. The best way to forecast GBP/USD is to explore the historical data and compare the ranges. Despite the changing world, there are yearly dynamics on Forex. For example, the period before the Winter holidays is usually very quiet, while the period of corporate reporting is quite volatile. These patterns repeat year by year and a trader can use these dynamics.
Making the forecasts for GBP/USD, remember the good time never comes. You can lose numerous opportunities waiting for the perfect time for a trade. The currency market is about trying to get the best result and move on.
The Most Effective Strategies to Trade GBP/USD
While GBP/USD is one of the major currency pairs, the trades usually have a large volume. A trader can use fundamental and technical analysis to define a trend and use any trading strategy. The large volume allows using some strategies that are not profitable on lesser trade volumes. Let us review three popular strategies for GBP/USD based on technical analysis.
Breakdown/Breakout
When the trend is strong, the pair can easily break a resistance or support level. At this moment, a trader can play along with the market and enter a low-risk position.
Pullback
After the level break, there is always a pullback, and a trader can play against the market and open a position against the trading waiting for a pullback.
Scalping
Scalping, or very quick trades, when a position is open for several minutes, is possible at the periods of high market activity, usually after the opening or after the major news.
Tips for Trading GBP/USD Using Fundamental Analysis
Several fundamental factors can move the price of GBP against the US Dollar. Please find the list below.
- Federal Reserve – every update from the Fed affects the USD price, so GBP/USD also moves.
- Bank of England – the central bank of the United Kingdom regulates the monetary policy for GBP and provokes price fluctuations.
- CPI – Consumer Price Index shows the inflation rate, and because inflation has an impact on interest rates, it is recommended to follow this index.
- Other factors that impact the GBP/USD are politics, geopolitical events, retail sales, and industrial production.
Final Thoughts
GBP/USD is one of the major currency pairs that traded on the forex market for all its history. The demand for both currencies is high, which means high liquidity. So, it is a good option for a trader, even for a newbie, to make a good profit with a relatively low-risk level.
by , 25.05.2022