- UK Employment and CPI Data Expected to Drive Market Sentiment
- BoE’s Mann Warns of Potential Upside Risks to Inflation
- Fed Projected to Cut Interest Rates in September
The Pound Sterling (GBP) shows resilience against major currencies, except the Australian Dollar (AUD) and New Zealand Dollar (NZD), in today’s trading session. Investors are closely watching upcoming UK Employment and Consumer Price Index (CPI) data releases, scheduled for this week.
Anticipation surrounds the UK Employment report, with expectations of a rise in the ILO Unemployment Rate to 4.5%. Of particular interest is the Average Earnings Excluding Bonuses data, which is forecasted to show a significant deceleration in wage growth to 4.6%. This potential decline in wage growth could lead to speculations of further interest rate cuts by the Bank of England (BoE).
Despite concerns over softening wage growth, BoE’s Catherine Mann highlights the persistent upside risks to inflation, emphasizing that price pressures in the economy may take time to subside. Mann’s comments come as annual headline inflation returns to the bank’s 2% target.
Daily Market Recap: Pound Sterling Poised for Volatility
- The Pound Sterling gains ground against the US Dollar (USD) amid stable market sentiment. The US Dollar Index (DXY) remains above 103.00, indicating a positive outlook for the Greenback.
- Market sentiment remains steady, with upcoming US CPI data likely to impact Federal Reserve (Fed) rate cut expectations. Economists predict a modest increase in both monthly and annual inflation figures.
- Traders assess a 46.5% probability of a 25 bps interest rate cut by the Fed in September, down from an 85% probability a week ago. This shift follows strong reactions to July’s weak US Employment data, prompting concerns of a looming recession.
- Fed Governor Michelle Bowman expresses confidence in inflation returning to the 2% target, hinting at gradual rate adjustments to support economic activity without overreacting to short-term data fluctuations.
Technical Analysis: Pound Sterling Resilience
The Pound Sterling displays strength following a positive divergence pattern on the daily chart, suggesting a potential uptrend continuation. Key support lies at the 200-day Exponential Moving Average (EMA) around 1.2650.
Should the GBP/USD break below 1.2665, further downside targets include 1.2613 and 1.2570. Conversely, a move above 1.2800 could propel the pair towards 1.2840 and 1.2900.
Understanding Pound Sterling: Key Factors Impacting its Value
The Pound Sterling (GBP) is a dominant currency in global FX markets, influenced by factors such as BoE monetary policy, economic data releases, and trade balance dynamics. BoE decisions on interest rates play a crucial role in shaping GBP’s value, with strong economic indicators supporting Sterling’s strength.
Traders closely monitor data releases like GDP, PMIs, and employment figures to gauge the UK economy’s health, which directly impacts the Pound Sterling. Additionally, the Trade Balance indicator reflects the country’s export-import dynamics, influencing GBP strength based on trade performance.