Pound Sterling recovery sustains as central bank to keep rates elevated for longer
The Pound Sterling (GBP) strengthens after hopes of more interest rate hikes from the Bank of England (BoE) are renewed. The GBP/USD pair discovers buying interest as the United Kingdom inflation is expected to remain well above 2% for the next four years. As the central bank is failing to achieve price stability sooner, further policy tightening cannot be ruled out.
This week, the UK manufacturing sector for June will be under scrutiny. The performance of British factories and preliminary GDP for the April-June quarter will be watched closely as the policy environment is highly restrictive and observers wonder if the economy will manage to avoid a recession. Meanwhile, claims from BoE Pill and the National Institute of Economic & Social Research (NIESR) indicate that UK PM Rishi Sunak will fulfill his promise of easing inflation to 5% by the end of 2023. Read more...
GBP/USD Forecast: Pound Sterling faces key resistance at 1.2825
After dropping below 1.2700 during the European trading hours on Tuesday, GBP/USD managed to erase a large portion of its daily losses before closing the day slightly above 1.2740. Supported by the positive shift seen in risk mood early Wednesday, GBP/USD extended its recovery beyond 1.2750. Although the technical outlook shows that sellers struggle to dominate action, the pair could find it difficult to rise steadily unless it clears the strong resistance that seems to have formed at 1.2825.
The bearish opening in Wall Street allowed the US Dollar (USD) to continue to find demand as a safe haven on Tuesday. After Philadelphia Federal Reserve Bank President Patrick Harker noted that they could probably start lowering the policy rate next year, however, the 10-year US Treasury bond yield declined sharply toward 4% and limited USD's gains. Read more...
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Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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