- The Pound Sterling declines against the US Dollar to nearly 1.2880 amid dismal market sentiment ahead of advanced US Q2 GDP data.
- Firm preliminary S&P Global/CIPS PMI for July has improved the UK’s economic outlook.
- BoE officials hesitate to authenticate market speculation for a rate cut in August.
In today’s London session, the Pound Sterling (GBP) weakens to 1.2880 against the US Dollar (USD). The decline in the GBP/USD pair is driven by negative market sentiment ahead of the release of the advanced United States (US) Q2 Gross Domestic Product (GDP) data at 12:30 GMT.
While S&P 500 futures show some gains in European trading hours, the US Dollar Index (DXY) remains sluggish around 104.30. The US Q2 GDP is expected to grow by 2%, fueled by strong consumer spending. A higher growth rate could lead to interest rate cuts by the Federal Reserve (Fed) in September.
Looking ahead, the US Dollar’s performance will be influenced by the Personal Consumption Expenditures Price Index (PCE) data for June, set to be published on Friday.
Market Movers: Pound Sterling Drops on Firm BoE Rate-Cut Prospects
- The Pound Sterling shows weakness against major currencies, except the Australian Dollar (AUD) and the New Zealand Dollar (NZD), as experts anticipate a rate cut by the Bank of England (BoE) in August.
- A Reuters poll indicates a high likelihood of a 25 basis points rate cut by the BoE in August, despite market participants pricing in a lower chance for rate cuts.
- BoE officials have not confirmed rate cut speculations, citing concerns about inflationary pressures in the service sector.
- The UK’s economic outlook improves with the release of the preliminary S&P Global/CIPS report for July, showing growth in the manufacturing and service sectors.
Technical Analysis: Pound Sterling Slips Below 1.2900
The Pound Sterling falls below the key support level of 1.2900 against the US Dollar, trading in a Rising Channel formation on a daily timeframe. The Cable holds the 20-day Exponential Moving Average (EMA) at 1.2866, with the 14-day Relative Strength Index (RSI) indicating a fading bullish momentum.
On the upside, a resistance zone near 1.3140 will be crucial for the GBP/USD pair.
Analysis and Breakdown
The current market conditions suggest a weakening Pound Sterling against the US Dollar due to negative sentiment and expectations of a rate cut by the Bank of England. The US Q2 GDP data and the upcoming PCE Price Index release will further impact the currency pair’s performance.
Investors should monitor economic indicators, central bank policies, and market sentiment to make informed decisions about their investments and financial strategies. Understanding the factors influencing currency movements can help individuals navigate volatile market conditions and protect their finances.