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- Pound Sterling holds strength as Fed rate-cut bets swell, UK inflation in focus
Pound Sterling holds strength as Fed rate-cut bets swell, UK inflation in focus
- The Pound Sterling rises to near 1.3000 against the US Dollar as the Fed looks set to start reducing interest rates in September.
- Hot US PPI report fails to diminish Fed rate cut bets.
- Investors await the UK inflation and employment data for fresh guidance on BoE interest rates.
The Pound Sterling (GBP) clings to gains slightly below the psychological resistance of 1.3000 against the US Dollar (USD) in Monday’s London session. The GBP/USD pair remains firm amid swelling expectations that the Federal Reserve (Fed) will start reducing interest rates from the September meeting.
Investors’ confidence in the possibility of the Fed reducing interest rates in September remains firm even though the United States (US) Producer Price Index (PPI) data for June, released on Friday, grew at a faster pace than expected. Both headline and core producer inflation were higher than expected on a monthly as well as an annual basis due to a significant increase in the cost of services.
Market speculation for Fed rate cuts rose significantly on Thursday after the US Consumer Price Index (CPI) report for June indicated that the disinflation process has resumed after halting in the first quarter of this year. Inflationary pressures decelerated on headline as well as the core front. The probability of the Fed cutting its key interest rates also grew because of visible cracks in the labor market.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, gains ground near 104.00. The USD Index finds cushion as investors rush to safe-haven after an assassination attempt on former US President Donald Trump in Pennsylvania. The situation has resulted in increased odds of Trump winning the US Presidential elections this year.
However, the near-term appeal of the US Dollar remains bearish as investors see the Fed lowering borrowing rates in September as a done deal. This week, investors will keenly focus on the US monthly Retail Sales data for June, which will be published on Tuesday. Economists have estimated that Retail Sales remained unchanged after a meager growth of 0.1% in May.
Daily digest market movers: Pound Sterling strengthens ahead of UK inflation and employment data
- The Pound Sterling gains against its major peers on Monday. The British currency strengthens as investors see the United Kingdom (UK) markets as a better spot for investments. Unlike the European Union and the US economy battling political uncertainty, the outright victory of Keir Starmer’s Labour Party has assured stable fiscal policies and smooth ministry distribution.
- Apart from that, deepening uncertainty over the timeframe for Bank of England (BoE) rate cuts has been a major catalyst to Sterling’s strength. Currently, financial markets expect the BoE to begin lowering interest rates from the August meeting. On the contrary, BoE policymakers hesitate to favor rate cuts in August as they worry about high inflation in the service sector due to strong wage growth. The pace at which wages are growing is roughly double than what is needed to restore price stability.
- This week, the uncertainty over the BoE rate-cut timeframe will wane to some extent as the UK Office for National Statistics (ONS) will publish the inflation and employment data on Wednesday and Thursday, respectively. The core CPI, which excludes volatile food and energy prices, is expected to have decelerated to 3.4% from May’s reading of 3.5%. Annual Average Earnings Including Bonus for the three months ending in May are estimated to have softened to 5.7% from the former release of 5.9%.
Pound Sterling Price Today:
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| GBP | EUR | USD | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| GBP | 0.02% | 0.10% | 0.00% | 0.14% | 0.03% | 0.28% | 0.15% | |
| EUR | -0.02% | 0.05% | -0.10% | 0.15% | 0.00% | 0.31% | 0.12% | |
| USD | -0.10% | -0.05% | -0.16% | 0.09% | 0.11% | 0.25% | 0.07% | |
| JPY | 0.00% | 0.10% | 0.16% | 0.25% | 0.05% | 0.38% | 0.04% | |
| CAD | -0.14% | -0.15% | -0.09% | -0.25% | -0.05% | 0.17% | -0.02% | |
| AUD | -0.03% | -0.01% | -0.11% | -0.05% | 0.05% | 0.29% | 0.14% | |
| NZD | -0.28% | -0.31% | -0.25% | -0.38% | -0.17% | -0.29% | -0.19% | |
| CHF | -0.15% | -0.12% | -0.07% | -0.04% | 0.02% | -0.14% | 0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Technical Analysis: Pound Sterling refreshes annual high at 1.3000
The Pound Sterling posted a fresh annual high at 1.3000 against the US Dollar on Friday. The near-term appeal of the GBP/USD pair has strengthened after a breakout above the March 8 high near 1.2900. The Cable is expected to extend its upside towards a two-year high near 1.3140.
All short-to-long-term Exponential Moving Averages (EMAs) are sloping higher, suggesting a strong bullish trend.
The 14-day Relative Strength Index (RSI) jumps to nearly 70.00 for the first time in more than a year, indicating a strong momentum towards the upside.
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, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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