GBPUSD a dive into ‘The Cable’

The GBPUSD pairs currencies from two of the strongest and most influential governments in the world, Great Britain and the United States.

The British pound is issued by the Bank of England and is used almost exclusively in Great Britain.In contrast, the US dollar, issued by the Federal Reserve, is widely used in North and South America.

It is also accepted as a secondary currency in many Asian and African nations, particularly in the Middle East.

The GBPUSD is a major currency pair, the third most traded, only behind the EURUSD and USDJPY. Its nickname ‘Cable’ originated from the cable that ran across the Atlantic Ocean transmitting the exchange rate between the two currencies. Due to advances in technology, the physical cable now serves no further practical use, however, the name stuck.

A tale of two currencies GBPUSD

The Pound Sterling became the official currency in 1707 when the United Kingdom was formed after England and Scotland united.

Before that, Scotland used the pound Scot or “Pund,” exchanged at a rate of 12.0 upon the union.

However, the use of the English pound has records dating as far back as 760. The use of the English pound dates back as far as 760.
Until 1855, all notes were handwritten by the Bank of England.

Until 1970, the pound was subdivided into shillings (20:1), pennies (12:1), and farthings (4:1). Today, it is simplified to the pounds and pence we know (100:1).

In modern times, this has been simplified to the pounds and pence we know today (100:1).

On the other side of the ‘pond,’ the United States Congress established the US dollar in 1785. After the American War of Independence from the British colonies in 1776. Prior to this, the USA used the same pounds, shillings and pennies that were adopted across the entire British Empire.  

Britain’s rejection of the Euro

If history had taken a different course, there may have been no discussion of GBPUSD today. Being a member of the European Union from 1973 until 2020.

One may understandably wonder how the GBP survived and why the United Kingdom did not adopt the EUR. Despite the question arising multiple times across its membership, ultimately the government and public opinion decide against it.

For example, in 1990, the UK joined the ERM (European Exchange Rate Mechanism) which was a prerequisite for adopting the euro.

However, it struggled to stay within the confines of the programme while attempting to keep its own currency. This cost the government between £3-6 billion, followed by an economic crash.

This crash would serve as the downfall of John Major (the prime minister of the time) who suffered a heavy defeat to Tony Blair in the ensuing election in 1997.

During his tenure as prime minister, Tony Blair stated that the UK could only consider adopting the euro if it passed “five economic tests.”

In 1997, it was announced that these tests were not met, and the pound remained. Again, in 2003, the same result was produced.

Public opinion also showed disfavour in adopting the EUR though most probably due to the sentimental value of the GBP. In the 2016 referendum, ‘Brexit’ was decided, with the majority of the British public choosing to leave the EU. Solidifying the GBP as Britain’s currency for the foreseeable future.

The GBP historically against the USD

Brexit served as one of the lows of the GBP against the USD. Comparing the year of Brexit (2016) to 2015, the GBPUSD fell around $0.3, from 1.55 to 1.25. However, looking at the history of the modern pound (post-1970) against the dollar, we will see that the all-time low occurred in 1985 at 1.05 (nearly 1-to-1!) .

This was mostly to do with a soaring US economy at the time however the huge trade deficit eventually led to the devaluation of the dollar with the GBPUSD exchange rate restoring itself closer to former levels.

And while the graph shows that the pound has always been able to nominally purchase more dollars (the exchange rate has always been higher than 1.0) it also shows that this difference is converging towards 1.0, raising the question if it will ever fall below.

In the early 70s, the all-time high was close to 2.63, meaning £1 could purchase $2.63. And although there have been fluctuations between 1970 and 2025, the graph shows a clear trend of a declining GBPUSD, arriving at 1.25 today. 

Trading GBPUSD

Last year, 2024, the average daily movement on USDGBP was approximately 80-120 pips. The monthly range tends to fall between 700-1000 pips. These numbers are slightly above other majors, such as EURUSD, which had an average daily movement of 65 pips and monthly 600-900 while USDCAD moved 63 pips daily and between 500-800 pips monthly. You could say that USDGBP is currently more volatile than most other majors.

Trading this pair appeals to both technical and fundamental traders. High market liquidity and depth make for reliable execution. From a fundamental standpoint, the US and UK economies are among the largest globally.

Effective Technical Analysis for GBPUSD Trading

Providing an abundance of readily available data and frequent announcements. This creates opportunities for news trading and swing trading, making them ideal for speculation.

To trade GBPUSD using technical analysis, traders often rely on key indicators to identify potential entry and exit points. A common approach is to use moving averages like the 50-day or 200-day to determine the overall trend. A crossover of a short-term moving average above a long-term one can signal a bullish trend, while the reverse may indicate a bearish one.

The RSI (Relative Strength Index) helps identify overbought or oversold conditions, with readings above 70 suggesting overbought conditions and below 30 indicating oversold. Additionally, the MACD (Moving Average Convergence Divergence) can highlight momentum shifts, with crossovers signalling potential buy or sell signals.

Chart patterns should also be integrated into the technical analysis. Price tends to bounce between predictable zones, providing clear opportunities for trades when price tests Support and Resistance levels. Candlestick patterns like engulfing or doji formations can also offer insights into potential reversals. Combining these tools enhances the accuracy of technical trades.

Brokers like IronFX invariably offer this currency pair, typically providing low spreads and fast, reliable execution times.

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