Pound Sterling recovers as US Dollar consolidates gains ahead of Fed Powell’s speech
|- The Pound Sterling rebounds strongly against the US Dollar ahead of Fed Powell’s dampens market sentiment.
- UK’s annual shop price inflation decelerated to its lowest since October 2021.
- The BoE may start cutting interest rates in August.
The Pound Sterling (GBP) recovers sharply after retracing to 1.2620 against the US Dollar (USD) in Tuesday’s New York session. The GBP/USD pair rebounds as the US Dollar (USD) surrenders of its gains despite uncertainty ahead of Federal Reserve (Fed) Chair Jerome Powell’s speech at 13:30 GMT and the United States (US) Nonfarm Payrolls (NFP) data for June, scheduled on Friday.
Powell is expected to provide cues about when the central bank will begin lowering its key borrowing rates. In June’s policy meeting, Powell said that the softening of inflationary pressures in May is encouraging, but policymakers want to see inflation decline for months before considering interest rate cuts. Officials projected only one rate cut this year as they lack evidence that inflation is on course to return to the desired rate of 2%.
This week, investors will pay close attention to the labor demand and the wage growth data, which will indicate whether the Fed should start reducing interest rates from the September meeting, as indicated by 30-day Federal Fund futures pricing data from the CME FedWatch tool.
In Tuesday’s session, investors will also focus on the US JOLTS Job Openings data for May, which will be published at 14:00 GMT. Economists expect the number of fresh job vacancies to be 7.90 million, slightly lower from 8.06 million in April.
Daily digest market movers: Pound Sterling bounces back strongly
- The Pound Sterling recovers against its major peers from Europe, Asia and the Asia-Pacific but is underperforming against North American currencies in Tuesday’s session. The British currency attracts bids even though easing United Kingdom (UK) price pressures have boosted expectations of early rate cuts by the Bank of England (BoE).
- The British Retail Consortium (BRC) showed on Monday that the annual shop price inflation grew 0.2% in June, at the slowest pace since October 2021, decelerating significantly from May’s reading of 0.6%. The agency also reported that food inflation slowed straight for 14 months, declining to 2.5% from 3.2%, and prices for non-food items fell by 1.0% year-on-year, Reuters reported.
- It is worth noting that annual headline inflation, as measured by the Consumer Price Index (CPI), has already returned to the bank’s target of 2%. High inflation in the service sector continues to be a major concern for BoE officials. Policymakers see service inflation as the preferred gauge for price pressures and want it to decline significantly to gain confidence for pivoting to policy normalization.
- Currently, investors expect the BoE to start reducing interest rates at its upcoming meeting in August.
- Meanwhile, the revised estimates for the manufacturing sector showed that factory activities expanded modestly in June. The S&P Global/CIPS Manufacturing PMI report showed on Monday that the factory activity fell to 50.9 from the preliminary reading and the estimates of 51.4. However, it remained above the 50.0 threshold that separates expansion from contraction.
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.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | -0.08% | 0.05% | -0.08% | 0.03% | 0.19% | 0.14% | |
| EUR | -0.10% | -0.18% | -0.03% | -0.19% | -0.07% | 0.07% | 0.04% | |
| GBP | 0.08% | 0.18% | 0.16% | 0.01% | 0.09% | 0.27% | 0.21% | |
| JPY | -0.05% | 0.03% | -0.16% | -0.14% | -0.01% | 0.12% | 0.08% | |
| CAD | 0.08% | 0.19% | -0.01% | 0.14% | 0.12% | 0.28% | 0.22% | |
| AUD | -0.03% | 0.07% | -0.09% | 0.00% | -0.12% | 0.16% | 0.10% | |
| NZD | -0.19% | -0.07% | -0.27% | -0.12% | -0.28% | -0.16% | -0.05% | |
| CHF | -0.14% | -0.04% | -0.21% | -0.08% | -0.22% | -0.10% | 0.05% |
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 recovers sharply from 1.2600
The Pound Sterling recovers losses against the US Dollar after correcting to near the round-level resistance of 1.2600. However, the GBP/USD pair remains under pressure as it fails to sustain above the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.
The Cable falls below the 20-day and 50-day Exponential Moving Averages (EMAs) near 1.2675 and 1.2666, respectively, suggesting that the near-term outlook is bearish.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, indicating indecisiveness among market participants.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Fri Jul 05, 2024 12:30
Frequency: Monthly
Consensus: 190K
Previous: 272K
Source: US Bureau of Labor Statistics
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
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