Pound Sterling slumps on global risk-aversion

The Pound Sterling declines against the US Dollar even though the latter plunges on firm Fed rate-cut prospects.
Slowing US labor demand has prompted expectations of the Fed’s bulk rate cuts.
Middle East tensions have escalated as Iran launched dozens of missiles on Israel.

The Pound Sterling (GBP) exhibits a weak performance against its major peers, except Asia-Pacific currencies, in Monday's European session, as dismal market sentiment has dampened the appeal of risk-sensitive assets. Growing Middle East tensions and fears of an economic slowdown in the United States (US) have improved the appeal of safe-haven assets, such as the Japanese Yen (JPY) and the Swiss Franc (CHF).

Tensions between Israel and Iran have turned into an all-out war after Iran-backed Hezbollah confirmed that the group launched dozens of missiles at Israel on Saturday. Iran vowed to retaliate against the assassination of Hamas leader Ismail Haniyeh by an Israeli airstrike in Tehran. The nation said last week that Israel has to pay the price for Haniyeh’s killing.

On the domestic front, the British currency will be influenced by market speculation about whether the Bank of England (BoE) will deliver subsequent rate cuts in September. Last week, the BoE reduced interest rates by 25 basis points (bps) to 5%, with a 5-4 vote split, as expected. On the interest rates outlook, the BoE refrained from committing to a pre-defined rate-cut path.

In the press conference, BoE Governor Andrew Bailey said, "We need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much." About the United Kingdom (UK) service inflation outlook, Bailey commented, "Services price inflation may rise slightly in August before easing in the rest of the year."

Daily digest market movers: Pound Sterling weakens against US Dollar

The Pound Sterling slumps to nearly 1.2770 against the US Dollar (USD) in Monday’s London session. The GBP/USD pair weakens as risk-aversion intensifies on deepening Middle East risks. Also, the Cable drops sharply despite the plummeting USD. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, plunges to near 102.40, the lowest since March 11.
The US Dollar has been hit hard badly by firm speculation that the Federal Reserve (Fed) will reduce interest rates by 50 basis points (bps) in September. Also, traders have priced in more than 100 basis points (bps) rate cuts this year. The expectations of the Fed’s bulk rate cut were boosted by easing United States (US) labor market conditions and contracting activities in the manufacturing sector.
The US Nonfarm Payrolls (NFP) report for July showed that fresh payrolls came in lower at 114K than estimates of 175K and June’s reading of 179K. The Unemployment Rate jumped to 4.3% from expectations and the prior release of 4.1%. Meanwhile, activities in the manufacturing sector, as measured by the Manufacturing Purchasing Managers Index (PMI), contracted at a faster pace to 46.8 in July from the prior release of 48.5. A slew of weak economic data indicates that the economy struggles to bear the consequences of higher interest rates, which point to a slowdown ahead.
In Monday’s session, investors will focus on the US ISM Services PMI data for July, which will be published at 14:00 GMT. Activities in the services sector are estimated to have expanded to 51.0 after contracting to 48.8 in June.

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 Australian Dollar.

	GBP	EUR	USD	JPY	CAD	AUD	NZD	CHF
GBP		-0.89%	-0.60%	-3.43%	-0.60%	0.51%	-0.22%	-1.64%
EUR	0.89%		0.16%	-2.76%	0.14%	1.27%	0.54%	-0.88%
USD	0.60%	-0.16%		-2.88%	0.00%	1.00%	0.38%	-1.03%
JPY	3.43%	2.76%	2.88%		3.00%	3.94%	3.37%	1.93%
CAD	0.60%	-0.14%	-0.01%	-3.00%		1.03%	0.38%	-1.22%
AUD	-0.51%	-1.27%	-1.00%	-3.94%	-1.03%		-0.72%	-2.14%
NZD	0.22%	-0.54%	-0.38%	-3.37%	-0.38%	0.72%		-1.42%
CHF	1.64%	0.88%	1.03%	-1.93%	1.22%	2.14%	1.42%

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 hovers near lower boundary of Rising Channel

The Pound Sterling is at a make-or-break near the lower boundary of the Rising Channel chart formation on a daily timeframe. Historically, a pullback move in the aforementioned chart pattern is considered a buying opportunity by market participants.

The GBP/USD pair fell on the back foot after breaking below the crucial support of 1.2900 on July 25. Meanwhile, the 100-day Exponential Moving Average (EMA) near 1.2730 has acted as major support for Pound Sterling bulls. The 14-day Relative Strength Index (RSI) declines to near 40.00, which is expected to act as a cushion for the momentum oscillator.

On the upside, the round level of 1.2800 will be a crucial resistance zone for the Pound Sterling bulls. Further up, the two-year high near 1.3140 will be a key resistance zone for the pair.

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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