Pound Sterling strengthens in countdown to US data, UK elections outcome

The Pound Sterling strengthens against the US Dollar as Fed’s Powell seems confident that disinflation has resumed.
UK elections outcome will be the major trigger for the Pound Sterling.
The US Dollar will dance to the tunes of US ISM Servies PMI, the ADP Employment Change for June, and the FOMC minutes.

The Pound Sterling (GBP) extends its upside to near the round-level resistance of 1.2700 in Wednesday’s London session after a sharp recovery from the three-day low of 1.2615 on Tuesday. The GBP/USD pair exhibits strength as the near-term outlook of the US Dollar (USD) has become uncertain after the speech from Federal Reserve (Fed) Chair Jerome Powell at the European Central Bank (ECB) Forum on Central banking on Tuesday prompted optimism on 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.

In Wednesday’s session, investors will keenly focus on the ADP Employment Change, the US ISM Services Purchasing Managers Index (PMI) data for June, and the Federal Open Market Committee (FOMC) minutes for the June meeting.

The ADP Employment report is expected to show that private sector employers hired 160K job-seekers, slightly higher than May’s reading of 152K. The ISM Services PMI is estimated to have expanded at a slower pace of 52.5 from the former release of 53.8. Investors will also focus on the Prices Paid, a sub-component of Services PMI, which indicates cost pressures in the service sector.

The FOMC minutes will provide cues about when the Fed will start reducing interest rates.

Daily digest market movers: Pound Sterling remains firm except against Australian Dollar

The Pound Sterling outperforms the majority of its peers except the Australian Dollar (AUD). The Australian Dollar is upbeat as expectations for rate cuts by the Reserve Bank of Australia (RBA) have been postponed to April 2025 from February of the same year projected earlier.
The British currency clings to gains 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 Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.12%	-0.08%	0.23%	-0.04%	-0.11%	-0.07%	-0.01%
EUR	0.12%		0.06%	0.37%	0.11%	-0.04%	0.10%	0.15%
GBP	0.08%	-0.06%		0.33%	0.05%	-0.08%	0.05%	0.08%
JPY	-0.23%	-0.37%	-0.33%		-0.27%	-0.35%	-0.21%	-0.27%
CAD	0.04%	-0.11%	-0.05%	0.27%		-0.11%	-0.02%	0.03%
AUD	0.11%	0.04%	0.08%	0.35%	0.11%		0.13%	0.18%
NZD	0.07%	-0.10%	-0.05%	0.21%	0.02%	-0.13%		0.04%
CHF	0.00%	-0.15%	-0.08%	0.27%	-0.03%	-0.18%	-0.04%

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 above 20-day EMA

The Pound Sterling trades sideways against the US Dollar after recovering sharply from the round-level support of 1.2600. The GBP/USD pair moves higher 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 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) 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.

Why it matters to traders?

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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