Pound Sterling (GBP) is predicted to trade between 1.3130 and 1.3190 in the short term. For the long term, analysts from UOB Group, Quek Ser Leang and Peter Chia, foresee it gradually rising within a range of 1.3065 to 1.3230. In the last 24 hours, GBP moved up to 1.3191 and closed at 1.3178, showing a 0.10% increase. However, there hasn’t been much upward momentum, so it is likely to stay within the 1.3130 to 1.3190 range.

Forecast for Pound Sterling

Looking ahead to the next one to three weeks, last Friday’s analysis suggested that any recent weakness in GBP has ended. While it may recover, it is expected to stay between 1.3050 and 1.3220. This forecast has been adjusted to a tighter range of 1.3065 to 1.3230. Believing that the recent weakness of the pound has passed, we expect GBP/USD to rise slightly but remain in the 1.3065 to 1.3230 range over the next few weeks. Without strong upward momentum, this suggests a slow rise rather than a quick spike. This view is supported by recent economic data that has created a stable environment for the currency pair. Last week, UK inflation figures showed the headline Consumer Price Index (CPI) at 2.1%, slightly above the Bank of England’s target. This suggests the BoE will likely not change its interest rates through the end of the year, limiting the pound’s potential for significant growth. This stands in contrast to the rate hikes we saw in 2023 when inflation was a bigger concern. On the other side, recent US job data indicated steady, though modest, growth, and US inflation has eased significantly over the past year. This keeps the Federal Reserve in a wait-and-see mode, preventing the dollar from gaining much strength. With both central banks appearing neutral, it supports the idea of range-bound trading in the near term.

Trading Strategies

For traders, the current environment suggests that selling options could be a good way to make income. We recommend selling out-of-the-money put spreads with a bottom strike below the 1.3065 level to collect premiums. This strategy profits from time decay and the expectation that the pair won’t fall below established support. For those looking to capitalize on potential modest gains, a bull call spread may be a wise choice. This involves buying a call option while selling a higher-strike call option with an expiration in the coming weeks. This approach limits risk and caps potential profit, which fits well with the view of a limited move up towards the 1.3230 resistance level. Implied volatility for GBP/USD options has been decreasing, reaching lows not seen since before the market disruptions in late 2022. This lower volatility makes option selling strategies like iron condors more appealing, as the premiums earned can yield a reasonable return in a sideways market. It indicates the market does not anticipate any major price swings in the near future. Create your live VT Markets account and start trading now.

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