GBP/USD Price Forecast: Flat lines near 1.3500 as bulls shrug off UK GDP ahead of US CPI

During the opening hours of European trading on Friday, the GBP/USD currency pair struggled to build on its small gains and settled near the psychologically significant 1.3500 level. However, this price ceiling held as traders held off on making new directional bets until the US Consumer Price Index (CPI) data were released. The British Pound (GBP) benefited slightly from the release of UK GDP figures, which indicated a robust expansion of 0.4% in July, surpassing market expectations.

Nevertheless, this brief rally in the GBP was short-lived, as anticipation of a forthcoming interest rate increase by the US Federal Reserve, supported by the US Producer Price Index (PPI) on Thursday, proved to be a positive factor for the US Dollar (USD). Additionally, ongoing geopolitical uncertainty reinforced the safe-haven appeal of the USD, further contributing to its strength.

From a technical standpoint, the GBP/USD pair was slightly below the 200-day Simple Moving Average (SMA) on the 4-hour chart, at 1.3518, implying a modestly bearish short-term outlook despite the pair's proximity to recent highs. The 38.2% Fibonacci retracement level, at 1.3522, acted as a nearby resistance zone, while the Relative Strength Index (RSI) around 42 and a slight negative Moving Average Convergence Divergence (MACD) histogram suggested that the bullish momentum might be waning rather than accelerating.

The immediate resistance zone comprised the 200-day SMA at 1.3518 and the 38.2% Fibonacci retracement at 1.3522, with the 23.6% retracement at 1.3580 serving as the next hurdle if buyers reclaimed control. Conversely, the initial support lay at the 50.0% Fibonacci retracement near 1.3475, followed by the 61.8% Fibonacci level at 1.3428.

In the event of a deeper correction, the 78.6% level at 1.3361 and the previous swing low around 1.3276 could be tested. The Pound Sterling, the oldest currency globally (dating back to 886 AD) and the official currency of the United Kingdom, is the fourth most traded currency in the world, accounting for 12% of all foreign exchange transactions, or approximately $630 billion daily, as of 2022.

The primary driver of the GBP's value is the Bank of England's monetary policy decisions, aimed at maintaining price stability around a 2% inflation target. The Bank of England adjusts interest rates to achieve this goal; higher rates make the UK a more attractive destination for global investors, generally bolstering the GBP, while lower rates have the opposite effect.

Economic indicators such as GDP, PMIs, and employment data can also impact the GBP's value. A robust economy can attract foreign investment and prompt the Bank of England to raise interest rates, strengthening the pound. Conversely, weak economic data may lead to a weaker GBP. The Trade Balance, which measures the difference between a country's exports and imports, is another significant data release for the GBP. A positive trade balance strengthens the currency, while a negative balance weakens it.