Analyzing the Current Market Trends and Economic Indicators
- The Pound Sterling clings to gains near 1.3400 against the US Dollar as the latter weakens after soft inflation data.
- A slight acceleration in the US core PCE inflation suggests that the Fed’s battle against inflation is not over yet.
- Investors await Fed Powell and BoE Greene’s speech.
Current Performance of Pound Sterling and US Dollar
The Pound Sterling (GBP) continues to hold gains near the round-level resistance of 1.3400 against the US Dollar (USD) in Monday’s London session. The outlook for the GBP/USD pair remains firm as the Greenback trades near yearly lows after data released on Friday showed that US inflation decelerated further in August. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near the key support of 100.20.
Key Points:
- The US core PCE inflation grew by 2.2%, slower than estimates of 2.3% and July’s reading of 2.5%.
- The core PCE price index rose accelerated to 2.7% from the prior release of 2.6%.
- Market expectations for more interest rate cuts have increased.
Upcoming Economic Data and Market Focus
This week, investors will focus on a slew of US economic data such as the ISM Manufacturing and Services PMIs, ADP Employment, and Nonfarm Payrolls (NFP) data for September and JOLTS Job Openings data for August, which will provide fresh cues on the current health of job market and the economy.
In Monday’s session, investors will pay attention to Jerome Powell’s speech at 17:00 GMT, who is expected to provide fresh interest rate guidance. Powell’s commentary could indicate whether the Fed will cut interest rates again by a larger-than-usual cut of 50 bps, as it did on September 18, or will shift to a gradual reduction of 25 bps.
Market Movers: Pound Sterling and Asia-Pacific Currencies
- The Pound Sterling exhibits strength against its major peers, except Asia-Pacific currencies, at the start of the week.
- Asia-Pacific currencies, such as the Australian Dollar (AUD) and the New Zealand Dollar (NZD), perform strongly after China’s cabinet announced on Sunday that they will focus on solving outstanding economic problems and strive to complete annual economic and social development goals.
- Investors expect the BoE to cut interest rates one more time by 25 bps in one of the remaining two meetings this year.
Technical Analysis: Pound Sterling Performance
The Pound Sterling consolidates near the key resistance of 1.3400 against the US Dollar in European trading hours. The near-term outlook of the GBP/USD pair remains firm as the 20-day Exponential Moving Average (EMA) near 1.3250 is sloping higher.
Key Technical Points:
- 20-day EMA near 1.3235 will be the key support for Pound Sterling bulls.
- The Cable will face resistance near the psychological level of 1.3500.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, GBP/JPY, or the ‘Dragon’, and EUR/GBP. The Pound Sterling is issued by the Bank of England (BoE).
Factors Influencing Pound Sterling Value:
- Monetary policy decided by the Bank of England.
- Economic indicators such as GDP, Manufacturing and Services PMIs, and employment data.
- Trade Balance, which measures the difference between exports and imports.