GBP/USD Prices, Charts, and Analysis

• Sterling bolstered by rate hike expectations.
• Key economic data and events next week will drive GBP/USD and EUR/GBP.

The British Pound is closing a positive week on the front foot, showing decent gains against a range of other G7 currencies. On a weekly low-to-high basis, cable is roughly 2 cents higher, GBP/JPY is around 2.5 Yen higher, while EUR/GBP has fallen the best part of one Euro. While all these currencies are slightly weak, Sterling has been better bid all week as expectations continue to build that the Bank of England may have to hike more aggressively in the coming months to temper inflation. UK inflation is seen falling over the coming months and may make current market predictions of a further 100 bps of UK interest rate hikes look a little hawkish.

Next week’s economic data and events calendar is full of market-moving potential. Just looking at the UK, US, and Euro releases highlights that GBP/USD and EUR/GBP may get a shot of volatility, especially with the US Fed and ECB policy decisions mid-week.

For all market-moving events and data releases see the real-time DailyFX Calendar

GBP/USD is back above prior resistance seen around 1.2550 and continues to push higher. Thursday’s bullish candle took out both the 20- and 50-day simple moving averages, and if the pair can remain above these two technical indicators then GBP/USD may have enough strength to test the recent multi-month high around 1.2680.

GBP/USD Daily Price Chart – June 9, 2023

GBP/USD Retail Traders are Net-Short Cable

Retail trader data show 36.30% of traders are net-long with the ratio of traders short to long at 1.75 to 1.The number of traders net-long is 23.70% lower than yesterday and 9.07% lower from last week, while the number of traders net-short is 43.64% higher than yesterday and 12.00% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/USD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bullish contrarian trading bias.

EUR/GBP traders will be focussed on the latest ECB interest rate decision with the market strongly forecasting a further 25 basis point rate hike. Recent weak growth numbers for Q4 2022 and Q1 2023 show the single-block is in a technical recession and the ECB will have to tread carefully in the coming months not to overdo rate hikes in case this economic slowdown becomes entrenched.

EUR/GBP is currently making a fresh nine-month low and may move still. All three moving averages are lined up in a bearish formation, leaving the pair susceptible to further losses. EUR/GBP is in oversold territory but not by much and while this may need to be corrected, as it stands the path of least resistance for EUR/GBP is lower. Thursday’s ECB meeting will be crucial for the pair.

EUR/GBP Daily Price Chart – June 9, 2023

What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.