The Pound Sterling (GBP) is facing downward pressure against major currencies, except those in the Asia-Pacific region, as speculation grows about a potential interest rate cut by the Bank of England (BoE) in August. This comes amidst concerns about the UK economy struggling to cope with high interest rates set by the BoE.
Recent data, such as the contraction in Retail Sales in June, reflects the impact of BoE’s restrictive monetary policy on consumer spending and inflationary pressures. Despite this, BoE officials are hesitant to endorse rate cuts due to high service sector inflation.
Investors are awaiting the release of preliminary UK S&P Global/CIPS Purchasing Managers’ Index (PMI) data for July, which is expected to show expansion in both manufacturing and service sectors. The recent political stability following UK Prime Minister Keir Starmer’s victory is also boosting confidence in economic prospects.
Key Market Movements: Pound Sterling Underperforms
- The GBP weakens against the USD to nearly 1.2880 in European trading hours on Wednesday, driven by risk aversion. Meanwhile, the USD remains strong ahead of key economic data releases.
- Investors are also focused on the US S&P Global PMI data for July, with expectations for modest expansion in the Manufacturing PMI and a slight slowdown in the Services PMI.
- This week’s highlights include the release of Q2 GDP and PCE Price Index data for June in the US, which will provide insights into the country’s economic growth.
- Market attention is also on the core PCE inflation data to gauge the timing of potential interest rate cuts by the Federal Reserve, expected to begin in September.
- Developments in the upcoming US presidential elections are also influencing market sentiment, with expectations of a Donald Trump victory.
Technical Analysis: Pound Sterling Support and Resistance Levels
The GBP/USD pair has dipped below the key support level of 1.2900, nearing the 20-day EMA at 1.2860. The RSI suggests a weakening bullish momentum, with resistance at 1.3140 and support at 1.2750.
Pound Sterling FAQs
The Pound Sterling (GBP) is the official currency of the UK and is influenced by BoE’s monetary policy decisions, economic data releases, and trade balance indicators. Higher interest rates and strong economic data can strengthen GBP, while lower rates and weak data may lead to depreciation.