Pound Sterling surges to 1.2770 after weak US private payrolls and Services PMI
|- The Pound Sterling strengthens against the US Dollar as Fed’s Powell seems confident that disinflation has resumed.
- US Services PMI falls below the 50.0 threshold and the number of private payrolls unexpectedly dropped in June.
- UK elections outcome will be the major trigger for the Pound Sterling.
The Pound Sterling (GBP) surges to near 1.2770 in Wednesday’s New York session after a sharp recovery from the three-day low of 1.2615 on Tuesday. The GBP/USD pair exhibits strength as the US Dollar (USD) dives as United States (US) ISM Services Purchasing Managers Index (PMI) contracts and ADP private payrolls unexpectedly fall in June.
The ISM Services PMI came in lower at 48.8 than the estimates of 52.5 and the former release of 53.8. Other indexes, such as Prices Paid and New Orders, which indicate cost pressures and the demand outlook in the service sector, respectively, were weaker than their prior release. Prices Paid expanded at a slower pace to 56.3 and New Orders contracted to 47.3.
The ADP Employment report showed that employers hired 150K job-seekers. Economists forecasted that individuals hired were slightly higher at 160K than May's reading of 157K, upwardly revised from 152K.
The US Dollar was already under pressure after Federal Reserve (Fed) Chair Jerome Powell's speech at the European Central Bank (ECB) Forum on Central Banking on Tuesday prompted optimism about rate cuts.
Powell said recent data suggests that the disinflation process has resumed, though we need more good inflation data before reducing interest rates. Powell added that risks to inflation are more balanced. He also said that an unexpected weakness in the labor market could force them to react on interest rates.
Powell’s improved confidence in the progress in disinflation has kept speculation on rate cuts in September firm. Going forward, the major trigger for the US Dollar will be the United States (US) Nonfarm Payrolls (NFP) report for June, which will be published on Friday.
Meanwhile, investors await Federal Open Market Committee (FOMC) minutes for the June meeting, which will be published at 18:00 GMT. The FOMC minutes will provide cues about when the Fed will start reducing interest rates.
Daily digest market movers: Pound Sterling holds gains against major peers
- The Pound Sterling outperforms its peers as Bank of England (BoE) policymakers worry about stubborn inflation in the United Kingdom (UK) service sector, which has been refraining from leaning towards policy easing. While inflation in other sectors has declined significantly due to weak demand from domestic and overseas markets.
- Due to the absence of top-tier economic data this week, investors will majorly focus on headlines relating to the UK elections, which kick off on Thursday. The UK Prime Minister Rishi Sunak-led Conservative Party is expected to suffer a defeat from the opposition Labor Party.
- New government formation is expected to deliver expansionary fiscal policies, which could boost price pressures and force the BoE to maintain a restrictive stance on interest rates for a longer period than previously expected.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.61% | -0.68% | -0.23% | -0.38% | -0.87% | -0.73% | -0.42% | |
| EUR | 0.61% | -0.07% | 0.38% | 0.23% | -0.26% | -0.10% | 0.19% | |
| GBP | 0.68% | 0.07% | 0.45% | 0.29% | -0.19% | -0.03% | 0.27% | |
| JPY | 0.23% | -0.38% | -0.45% | -0.18% | -0.67% | -0.51% | -0.21% | |
| CAD | 0.38% | -0.23% | -0.29% | 0.18% | -0.49% | -0.34% | -0.03% | |
| AUD | 0.87% | 0.26% | 0.19% | 0.67% | 0.49% | 0.15% | 0.46% | |
| NZD | 0.73% | 0.10% | 0.03% | 0.51% | 0.34% | -0.15% | 0.30% | |
| CHF | 0.42% | -0.19% | -0.27% | 0.21% | 0.03% | -0.46% | -0.30% |
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 rises to near 78.6% Fibo retracement
The Pound Sterling strengthens against the US Dollar after recovering sharply from the round-level support of 1.2600. The GBP/USD pair moves higher above the 78.6% Fibonacci retracement support at 1.2770, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.
The Cable rises above the 20-and 50-day Exponential Moving Averages (EMAs) near 1.2680 and 1.2666, respectively, suggesting that the near-term outlook is bullish.
The 14-day Relative Strength Index (RSI) rises to near 60.00 range. A decisive break above the same would shift momentum towards the upside.
Economic Indicator
ISM Services PMI
The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US services sector, which makes up most of the economy. The indicator is obtained from a survey of supply executives across the US based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that services sector activity is generally declining, which is seen as bearish for USD.
Read more.Last release: Wed Jul 03, 2024 14:00
Frequency: Monthly
Actual: 48.8
Consensus: 52.5
Previous: 53.8
Source: Institute for Supply Management
The Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI) reveals the current conditions in the US service sector, which has historically been a large GDP contributor. A print above 50 shows expansion in the service sector’s economic activity. Stronger-than-expected readings usually help the USD gather strength against its rivals. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are also watched closely by investors as they provide useful insights regarding the state of the labour market and inflation.
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