Pound Sterling recovers as UK PM Sunak shows confidence about price stability

• Pound Sterling has bounced back as investors’ risk-taking ability has strengthened.
• Investors are awaiting United Kingdom’s Services PMI, which is expected to remain steady.
• Rishi Sunak has assured full utilization of monetary and fiscal tools to bring down stubborn inflation.

The Pound Sterling (GBP) has picked strength as the market mood is turning cheerful. The GBP/USD pair has recovered sharply as the Bank of England (BoE) is taking some strong steps to strengthen financial conditions. United Kingdom’s inflation looks set to pick pace again as labor shortages are expected to elevate.

After a marginal increase in United Kingdom’s Manufacturing PMI, investors are shifting their focus to the Services PMI. UK’s service sector is in an expansion stage, unlike factory activity which has been posting contraction, straight for the past 11 months.

Meanwhile, UK PM Rishi Sunk is confident that price stability will be achieved.

Daily Digest Market Movers: Pound Sterling jumps swiftly to 1.2720         

• United Kingdom Prime Minister Rishi Sunak has promised to fully utilize monetary and fiscal policy to tame persistent inflation.
• UK Sunak cited that inflationary pressures are showing a higher persistence than expected but that doesn’t state that the policy measures used are the wrong ones.
• The Britain government has announced that it is committed to spending 11.6 billion pounds on international climate finance.
• Firms are ramping up investments in Germany to compensate for custom delays and tedious bureaucracy inspired by an exit of Britain from the European Union.
• Financial Times reported that the Bank of England is planning to discuss with international banks to set up subsidiaries.
• Higher inflationary pressures in the UK economy are backed by shortages of labor and 45-year high food price inflation.
• Labor shortages are expected to elevate further as almost one in three female workers are expected to consider early retirement because of health issues.
• UK Finance Minister Jeremy Hunt gave his backing to the country's financial regulator Financial Conduct Authority (FCA) to ensure banks are passing on better savings rates to consumers, as reported by Reuters.
• Investors are focusing on the June Services PMI data, which is seen steady at 53.7.
• The monthly survey by Citi Bank and polling firm YouGov showed that consumer inflation expectations for one year have increased to 5.0% in June from 4.7% in May.
• Financial markets are anticipating that the BoE will eventually raise interest rates to 6.25% from the current state of 5%.
• The risk profile has turned cautious ahead of the United States markets opening after a holiday.
• The US Dollar Index (DXY) has dropped sharply as investors are confident that the Federal Reserve (Fed) will raise interest rates only once this year despite Fed chair Jerome Powell considering two small interest rate hikes appropriate.
• Later this week, investors will focus on Federal Open Market Committee (FOMC) Minutes, ISM Services PMI, and Employment data.

Technical Analysis: Pound Sterling continues winning streak

Pound Sterling has continued its three-day winning spell by surpassing Tuesday’s close around 1.2710 as the US Dollar Index is under pressure ahead of FOMC Minutes. The Cable has continued to maintain sustainability above the 20-period daily Exponential Moving Average (DEMA) at 1.2667, which indicates that the short-term trend is bullish.

Momentum oscillators are looking to shift into the bullish trajectory, which would infuse strength in the Pound Sterling bulls.

Buyers could add positions if Cable manages to jump firmly above 1.2740. The upside bias could fade if it corrects below the psychological support of 1.2500.