The GBP/USD pair has seen a second consecutive day of positive traction as the US Dollar weakens slightly. However, the intraday uptick has slowed down after the release of disappointing UK macro data. Despite this, the downside appears limited as traders await the crucial US CPI report.
Following a bounce from the 1.3050-1.3045 region, the GBP/USD pair struggles to move past the 1.3100 mark. The UK Office for National Statistics reported flat economic growth in July, missing expectations for a 0.2% increase. Additionally, Industrial and Manufacturing Production in the UK unexpectedly shrank during the same month, leading to concerns about more interest rate cuts by the Bank of England.
On the other hand, the US Dollar is facing some selling pressure, breaking a three-day winning streak due to dovish Federal Reserve expectations. This has provided support to the GBP/USD pair and prevented a significant downside. Traders are cautious ahead of the release of the US CPI report, which will impact market expectations for the Fed’s upcoming policy meeting.
The US Consumer Price Index report will play a crucial role in determining the size of the Fed’s rate cut in September. This will influence USD demand and could provide momentum to the GBP/USD pair. However, the current fundamental backdrop suggests a need for caution before expecting further appreciation in the currency pair.
Economic Indicator: Gross Domestic Product (MoM)
The Gross Domestic Product (GDP) is a key measure of economic activity in the UK, released monthly and quarterly by the Office for National Statistics. A rise in GDP is considered bullish for the Pound Sterling (GBP), while a low reading is seen as bearish. For more information, click here.