GBP/USD stabilizes but remains fragile

Finance

GBP/USD stabilizes but remains fragile

GBP/USD Forecast: Pound Sterling stabilizes but remains fragile

After dipping to its weakest level since November 2023 below 1.2250 in the European session on Thursday, GBP/USD erased a portion of its losses in the second half of the day. The pair trades in a narrow channel at around 1.2300 on Friday as investors keep a close eye on the action in the UK gilt markets while waiting for December labor market data from the US.

The selloff in the UK gilts continued early Thursday, causing Pound Sterling to weaken against its major rivals. In the European morning on Friday, the yield on the 10-year UK gilt stays in positive territory at around 4.85%. Another leg higher in this yield could trigger a new bout of selloff in GBP. On the other hand, a downward correction could help GBP/USD hold its ground.

GBP/USD outlook: Hits new multi-month low, bears eye 1.2000 zone targets

Cable fell to 14-month low on Thursday morning, as steep bear-leg off 1.2575 lower top extends into third straight day. Strengthening dollar, crisis about Britain‘s fiscal outlook and uncertainty over Trump’s tariff plan, were the key contributors to pounds latest weakness.

Bearish technical picture on daily chart, as well as a number of weekly MA bear-crosses, add to negative near term outlook, with break below former low at 1.2299 (Apr 21) also generating a negative signal.

GBP/USD targets with persistent downtrend

On Thursday, US Treasury yields advanced, reflecting a resurgence in global demand for bonds following a recent decline driven by concerns over elevated inflation and mounting government debt. Concurrently, the sell-off in UK assets persisted, as investors grappled with a precarious mix of entrenched inflation and weak economic growth. These factors continue to weigh heavily on the British pound, exacerbating its decline against the US dollar.

The GBP/USD pair remains firmly entrenched in a four-month downtrend, having broken below the key support level at 1.23522 on the daily chart. Sellers are currently testing the immediate support at 1.22915, and a sustained breach of this level could extend the decline toward subsequent targets at 1.22143 and 1.21291.