Pound Sterling retraces against US Dollar in countdown to Fed Powell’s speech

The Pound Sterling faces selling pressure against the US Dollar as uncertainty 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) retraces to 1.2620 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair weakens as market participants turn risk-averse amid 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 outperforms against European and Asian peers

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 attracks 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.

	GBP	EUR	USD	JPY	CAD	AUD	NZD	CHF
GBP		0.17%	-0.04%	0.10%	-0.05%	0.06%	0.31%	0.10%
EUR	-0.17%		-0.24%	-0.09%	-0.27%	-0.11%	0.11%	-0.09%
USD	0.04%	0.24%		0.11%	-0.03%	0.12%	0.36%	0.14%
JPY	-0.10%	0.09%	-0.11%		-0.15%	0.01%	0.22%	0.01%
CAD	0.05%	0.27%	0.03%	0.15%		0.16%	0.39%	0.17%
AUD	-0.06%	0.11%	-0.12%	-0.01%	-0.16%		0.23%	0.02%
NZD	-0.31%	-0.11%	-0.36%	-0.22%	-0.39%	-0.23%		-0.22%
CHF	-0.10%	0.09%	-0.14%	-0.01%	-0.17%	-0.02%	0.22%

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 holds crucial support of 1.2600

The Pound Sterling slumps against the US Dollar after a short-lived pullback to near the round-level resistance of 1.2700. The GBP/USD pair 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

Fed's Chair Powell speech

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

Next release: Tue Jul 02, 2024 13:30

Frequency: Irregular

Consensus: -

Previous: -

Source: Federal Reserve

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