GBP/USD posts a fifth straight gain on Wednesday

VaselineAugust 21, 2024

0 3 minutes read

GBP/USD posts a fifth straight gain on Wednesday

GBP/USD broke above 1.3100 on Wednesday as the bull run continues.
Sterling is enjoying a healthy bid as the US dollar falls.
Jackson Hole, the PMI data warehouse still looms ahead.

GBP/USD briefly tested the chart on Wednesday’s 1.3100 high side as Cable continues to push deeper into bull country. The pair is heading for fresh 13-month highs, setting a top intraday bid of 1.3112, with sterling threatening to reach its highest prices against the greenback since April 2022.

The U.S. Bureau of Labor Statistics announced a steep decline of more than 800,000 jobs in March’s Non-Farm Payrolls (NFP), sharply revising previous low-level job growth numbers. The tilt in hiring has led markets to add to their bets on a double rate cut by the Federal Reserve (Fed) in September. Rate cut bets were pegged higher on Wednesday after the latest minutes of the Fed meeting revealed that US central bank policymakers had already begun discussions on when to start cutting interest rates as early as July.

UK Purchasing Managers’ Index (PMI) figures for August are expected to rise slightly on Thursday, with the UK Services PMI to follow up to 52.8 from 52.5. The manufacturing section is expected to hold steady at 52.1.

US PMI business activity survey results are also scheduled for release on Thursday, as well as the launch of the annual Jackson Hole Symposium over the weekend. Wednesday will feature the latest Federal Reserve (Fed) meeting minutes, but market forces will generally look to Thursday’s exits for reasons to move.

Expectations for US S&P Global Manufacturing PMI activity are expected to hold steady at 49.6 in August, while the Services PMI component is expected to drop a full point to 54.0 from 55.0. The launch of the Jackson Hole Symposium is expected to get plenty of investor attention on Thursday, but Friday’s appearance by Fed Chairman Jerome Powell will set the overall tone for market sentiment next week.

GBP/USD Technical Outlook

With Cable on course for a fifth consecutive gain, GBP/USD is poised for a breach at multi-year highs, provided buyers can keep the pressure on long enough to keep prices rising beyond the July 2023 peak of 1.3142 .The odds favor the buyers as GBP/USD closed in the green for all but one of the last ten consecutive trading days.

GBP/USD Daily Chart

Frequently Asked Questions for Pounds Sterling

The British pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded foreign exchange (FX) unit in the world, accounting for 12% of all trades, averaging $630 billion per day as of 2022. Its key trading pairs are GBP/USD, aka “Cable”, which represents 11% of FX, GBP/JPY or “The Dragon” as it is known to traders (3%) and EUR/GBP (2%) . The pound sterling is issued by the Bank of England (BoE).

The most important factor influencing the value of the pound sterling is the monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its main objective of “price stability” – a steady inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the BoE will try to control it 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 that economic growth is slowing. In this scenario, the BoE will consider cutting interest rates to reduce credit so that companies borrow more to invest in growth-generating projects.

Data releases measure the health of the economy and can affect the value of the pound. Indicators such as GDP, manufacturing and services PMI 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, it may encourage the BoE to raise interest rates, which will directly strengthen the GBP. Otherwise, if the economic data is weak, the pound is likely to fall.

Another significant release of data for the pound is the trade balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports in a given period. If a country produces highly sought-after exports, its currency will only benefit from the additional demand created by foreign buyers looking to purchase these goods. Therefore, a positive net trade balance strengthens a currency and vice versa for a negative balance.

VaselineAugust 21, 2024

0 3 minutes read

GBP/USD Technical Outlook

GBP/USD Daily Chart

Frequently Asked Questions for Pounds Sterling

Vaseline

Related Articles

Gateway Wealth Partners LLC increases stake in Exxon Mobil Co. (NYSE:XOM)

Down 50% from high, is Lululemon stock a good buy right now?

Big Oil cashes in, while clean fuel startups falter

Congo begins smallpox vaccination after WHO declares state of emergency