GBP/USD rises for third straight day as Greenback pulls back

VaselineAugust 19, 2024

0 3 minutes read

GBP/USD rises for third straight day as Greenback pulls back

GBP/USD fell just short of retrieving the 1.3000 month handle.
UK and US PMIs are scheduled for Thursday this week.
The start of the Jackson Hole Economic Symposium is approaching.

GBP/USD was up a third of one per cent after the US dollar continued to slide to start the new trading week. Greenback flows have extended a near-term reversal as investors shrug off a recent dip in market sentiment. A raw batch of bad US data reignited investor fears of an imminent US recession, but a late surge in recent US data prints calmed the nerves of investors, who must return to waiting for signs of a rate cut from part of the Federal Reserve (Fed).

Forex Today: Attention turns to Fedspeak ahead of Jackson Hole

Midweek is a quiet affair as markets await key data on Thursday as well as the launch of this year’s Jackson Hole Economic Symposium. All three are expected to hit the markets starting Thursday.

UK Purchasing Managers’ Index (PMI) figures are expected to hold high in August. UK manufacturing PMI numbers are expected to hold at 52.1, while the services PMI component is expected to rise to 52.8 from 52.5 over the same period.

Across the Atlantic, US PMI numbers are expected to ease on Thursday. US manufacturing PMI is expected to edge slightly lower in August to 49.5 from 49.6, while US services PMI numbers are expected to drop a full point to 54.0 from 55. 0.

The Jackson Hole Economic Symposium, set to kick off a multi-day central banker extravaganza on Thursday, will have investors around the world watching for any signals from Fed policymakers about the likelihood of a Fed rate cut in September.

Recent bets on a double dip in September have eased significantly after peaking at 70% two weeks ago. According to CME’s FedWatch tool, rate markets are pricing in a slim one-in-five chance of a 50 bps cut on September 18. Markets are generally still off 25 bps in September with three or four quarters of pricing. point reductions expected by the end of the year.

GBP/USD price

Despite a firm extension of bullish momentum on Monday, GBP/USD bidders failed to recover major price support from 1.3000, suspending price action to dry up at key resistance levels at the end of a one-sided momentum play. Short-term momentum traders will look for an opportunity to go short, targeting a dip back into the 50-day exponential moving average (EMA) near 1.2800.

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 19, 2024

0 3 minutes read

GBP/USD price

GBP/USD Daily Chart

Frequently Asked Questions for Pounds Sterling

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