GBP/USD price analysis: pound falls to new low on strong US data

Data current as of 2/5/2024

Key points

• New YTD lows for GBP/USD under 1.2600: (1:05)
• US services PMI hits 4-month low: (2:09)
• US adds 353,000 jobs in January: (3:07)
• Could pound slide further: (4:42)
• 67% of GBP/USD traders are long: (6:16)

GBP/USD, colloquially known as "Cable," has recently marked new year-to-date lows, slipping under the 1.2600 price level. This downturn reflects the complex interplay of economic indicators and trader sentiment that impact currency values. As the British pound (GBP) weakens against the US dollar (USD), traders and investors are carefully analyzing the factors contributing to these movements to anticipate future trends and strategize accordingly.

GBP/USD price action

Strong US data sends dollar higher

One of the influencing factors behind the dollar's strength has been the performance of the services sector in the United States, with the US services Purchasing Managers' Index (PMI) reporting a four-month high. The PMI is a critical measure of the economic health of the services sector, and this strong reading arrives in tandem with strength in the labor market, with the addition of 353,000 jobs in January.

Despite the bearish trend for GBP/USD , it is noteworthy that a significant proportion of traders remain optimistic about the pound's prospects. With 67% of GBP/USD traders at IG holding long positions, there is a sense of anticipation that the pound could rebound or at least stabilize in the near term. This sentiment may be based on various factors, including potential shifts in monetary policy, geopolitical developments, or changes in the relative economic performances of the UK and the US.

The question many are pondering is whether the pound could slide further in the face of these mixed signals. Currency markets can be quite volatile, and movements can be swift and driven by a range of domestic and international factors. For instance, if the Bank of England were to adjust interest rates or if there were significant political events in the UK, these could have immediate and profound effects on the value of the pound.

For traders, the key is to stay informed and agile. By closely monitoring economic indicators, such as PMIs, employment data, inflation rates, and central bank communications, traders can better position themselves to capitalize on currency fluctuations. Moreover, understanding the sentiment and positioning of other market participants can provide additional context for making informed decisions.

How to trade GBP/USD

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on GBP/USD

Trading forex requires an account with a forex broker like IG. GBP/USD can be found in the "Major" pairs tab. Many traders watch other major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.