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- The GBP/USD pair reached new lows on Friday as the British pound continued to decline.
- Upbeat US PMIs drive out risk appetite and boost the dollar.
- Sterling traders are bracing for a long wait for GDP next Friday.
The GBP/USD pair closed on Friday at a five-week low of 1.2622, the third consecutive bearish week for the pound. The Bank of England’s mid-week interest rate stabilization did little to spark confidence in sterling, and a late-week rise in the US Purchasing Managers’ Index (PMI) also pushed the market broadly. Willingness to take risks Downwards, which led to a rise in the US dollar before the end of the trading week.
United kingdom Retail Inflation rose to 2.9% m/m in May, shrugging off expectations for a decline to 1.5% from a revised deflation of -1.8% the previous month. UK PMIs were also mixed, with the S&P Global/CIPS Manufacturing PMI for June rising to 51.4 versus expectations of 51.3 and 51.2 in the previous month. The services PMI contracted sharply to a seven-month low of 51.2, completely missing expectations for a rise to 53.0 from 52.9.
Forecast for next week: The US personal consumption expenditures index is unlikely to move the Fed’s direction
On the US side, the S&P global manufacturing PMI for June rose to 51.7 versus 51.7 Climate prediction It fell to 51.0 from the previous 51.3. The Services PMI also beat expectations, rising to its highest level in almost two years at 55.1 versus an expected decline to 53.7 from 54.8.
In light of the optimistic US economic data that reduces the possibility of the Federal Reserve cutting interest rates early, Market sentiment Backed into the safe haven dollar on Friday.
The UK economy remains weak heading into next week, leaving sterling traders awaiting next Friday’s GDP reading. US economic data prints will also be moved to mid-level releases early next week, with US GDP updated next Thursday.
Technical forecast for GBP/USD
The GBP/USD pair recorded its third bearish week in a row as the pound continues its decline against the US dollar. The pair fell to a five-week low, hitting a new low for the week early Friday at 1.2622. cable Decreased -0.92% peak to trough from peak bids for the week near 1.2740.
Daily candles are facing a sharp bearish decline after rejection from the supply zone near the 1.2800 handle. Candles are on track to decline to the 200-day Exponential Moving Average (EMA) at 1.2586.
GBP/USD hourly chart
GBP/USD daily chart
Questions and answers about the pound sterling
The British Pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most popular foreign exchange (FX) trading unit in the world, accounting for 12% of all transactions, averaging $630 billion per day, according to 2022 data. Its main trading pairs are GBP/USD, also known as “Cable”. , which represents 11% of foreign currencies, GBP/JPY, or “the dragon” as traders know it (3%), and EUR/GBP (2%). . The pound sterling is issued by the Bank of England (BoE).
The single most important factor affecting the value of the pound sterling is the monetary policy decided by the Bank of England. The Bank of England bases its decisions on whether it has achieved its primary objective of “price stability” – a stable inflation rate of around 2%. The primary tool for achieving this is adjusting interest rates. When inflation is too high, the Bank of England will try to rein it in by raising interest rates, making it more expensive for individuals and businesses to obtain credit. This is generally positive for the pound, as higher interest rates make the UK a more attractive place for global investors to put their money. When inflation falls to a very low level, it is a sign that economic growth is slowing. In this scenario, the Bank of England would consider lowering interest rates to reduce the cost of credit so that companies borrow more to invest in growth-generating projects.
Data releases measure the health of the economy and can affect the value of the British pound. Indicators such as GDP, manufacturing PMIs, services and employment can all influence the direction of the pound. A strong economy is good for the pound. Not only does it attract more foreign investment, but it may encourage the Bank of England to raise interest rates, which will directly strengthen sterling. Otherwise, if economic data is weak, the British pound is likely to fall.
Another important data release for the British Pound is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports during a certain period. If a country produces highly sought-after exports, its currency will take full advantage of the additional demand generated by foreign buyers seeking to purchase these goods. Therefore, a positive net trade balance strengthens the currency and vice versa for a negative balance.
