Sterling finds support but struggles to recover

VaselineSeptember 11, 2024

0 4 minutes read

Sterling finds support but struggles to recover

GBP/USD is trading in a tight range slightly below 1.3100 on Wednesday.
August US inflation data will be scrutinized by investors.
Disappointing UK data prevents the pound from gathering strength.

Following Tuesday’s indecisive action, GBP/USD is struggling to make a decisive move in either direction and is trading in a tight channel slightly below 1.3100. August US inflation data could trigger the next big move in the pair.

Sterling PRICE This week

The table below shows the percentage change in the British Pound (GBP) against the main listed currencies this week. The pound was weakest against the Japanese yen.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.41%	0.36%	-0.47%	0.16%	0.17%	0.54%	0.18%
EURO	-0.41%		-0.10%	-0.83%	-0.25%	-0.29%	0.15%	-0.25%
GBP	-0.36%	0.10%		-0.85%	-0.14%	-0.18%	0.23%	-0.15%
JPY	0.47%	0.83%	0.85%		0.62%	0.65%	1.00%	0.84%
CAD	-0.16%	0.25%	0.14%	-0.62%		0.05%	0.37%	0.18%
AUD	-0.17%	0.29%	0.18%	-0.65%	-0.05%		0.41%	0.00%
NZD	-0.54%	-0.15%	-0.23%	-1.00%	-0.37%	-0.41%		-0.37%
CHF	-0.18%	0.25%	0.15%	-0.84%	-0.18%	-0.01%	0.37%

The heat map shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quote currency is chosen from the top row. For example, if you choose British Pound in the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will be GBP (basis)/USD (quote).

Although the US dollar (USD) remains under bearish pressure in the European session on Wednesday, GBP/USD is struggling to gain traction, with the latest UK data disappointing its market participants.

Britain’s Office for National Statistics reported Wednesday morning that industrial output and manufacturing output fell by 0.8% and 1% respectively on a monthly basis in July. Both prints missed analysts’ estimates. Other UK data showed monthly gross domestic product (GDP) was unchanged in July.

In the second half of the day, the US Bureau of Labor Statistics will release consumer price index (CPI) data for August. Investors are likely to react to a surprise in the monthly core CPI reading, which is not skewed by base effects and excludes volatile food and energy prices.

Markets expect a 0.2% rise in core monthly CPI in August. A stronger than forecast reading could provide a boost to the USD and pave the way for another drop in GBP/USD. On the other hand, investors could reassess the likelihood of a 50 basis point (bps) Federal Reserve rate cut in September, which is currently at 35%, according to the CME FedWatch tool, on a soft print and could make USD to be renewed. selling pressure.

GBP/USD Technical Analysis

GBP/USD remains below the 20-period, 50-period and 100-period simple moving averages (SMA) on the 4-hour chart, while the Relative Strength Index (RSI) indicator remains near 40, suggesting a bearish trend remains intact.

GBP/USD could meet first support at 1.3040 (38.2% Fibonacci retracement level of last uptrend) before 1.3000 (psychological level, static level) and 1.2970 (50% Fibonacci retracement, SMA of 200 periods).

On the upside, intermediate resistance is located at 1.3100 (static level) ahead of 1.3130 (50-period SMA, 100-period SMA) and 1.3200 (psychological level, static level).

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.

VaselineSeptember 11, 2024

0 4 minutes read

Sterling PRICE This week

GBP/USD Technical Analysis

Frequently Asked Questions for Pounds Sterling

Vaseline

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