- The Pound Sterling finds support near 1.2620 against the US Dollar.
- UK’s economic outlook appears to be uncertain ahead of UK elections.
- The BoE is expected to start lowering interest rates in August.
The Pound Sterling (GBP) gains ground against the US Dollar (USD) and trades around 1.2650 in Monday’s London session after facing a sharp sell-off last week. The GBP/USD pair rebounds as the upside move in the US Dollar Index (DXY), which tracks the Greenback’s value against six major peers, appears to have paused and struggles to extend upside above the immediate resistance of 106.00.
However, the near-term outlook of the US Dollar has strengthened after the preliminary S&P Global Purchasing Managers Index (PMI) report for June showed that activities in the manufacturing and the service sector surprisingly expanded at a faster pace than expected. The report showed that the Composite PMI surprisingly jumped to 51.7. Investors expected the PMI data to decline to 51.0 from the prior release of 51.3.
The report also lifted the mood of Federal Reserve (Fed) policymakers as it said, “Selling price inflation has meanwhile cooled again after ticking higher in May, down to one of the lowest levels seen over the past four years. Historical comparisons indicate that the latest decline brings the survey’s price gauge into line with the Fed’s 2% inflation target.”
Daily digest market movers: Pound Sterling is underpinned against majority of currencies
- The Pound Sterling performs strongly against its major peers, except the Euro, even though financial markets expect that the Bank of England (BoE) will start reducing interest rates from the August meeting. Market speculation for the BoE to begin lowering its key borrowing rates in August was boosted by a slightly dovish monetary policy statement commentary on the interest rate outlook.
- In the monetary policy statement, policymakers said the decision to hold interest rates at 5.25% was “finely balanced”, which investors took it as a signal that rate cuts are around the corner.
- Market expectations for BoE rate cuts have also strengthened as annual headline inflation has returned to the desired rate of 2%. In the press conference after the June meeting, BoE Governor Andrew Bailey acknowledged, “It’s good news that inflation has returned to our 2% target.” And “officials want to be sure that inflation should stay low which is why we have decided to leave interest rates unchanged.
- Though price pressures have returned to 2%, officials worry about the risks of persistent service inflation. In May, service inflation decelerated at a slower pace to 5.7% from the prior release of 5.9%. Investors expected the underlying inflation to have declined to 5.5%.
- Meanwhile, investors have become concerned over the United Kingdom’s (UK) economic outlook after the preliminary S&P Global/CIPS PMI report showed that the overall activity unexpectedly slowed in the service sector in June. However, the Manufacturing PMI expanded at a faster pace than estimates and the former release. “The slowdown in part reflects uncertainty around the business environment in the lead-up to the general election, with many firms seeing a hiatus in decision-making pending clarity on various policies,” the report said.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.08% | -0.05% | -0.07% | -0.17% | -0.07% | -0.02% | |
| EUR | 0.19% | 0.13% | 0.22% | 0.17% | 0.04% | 0.17% | 0.24% | |
| GBP | 0.08% | -0.13% | 0.04% | 0.04% | -0.08% | 0.04% | 0.11% | |
| JPY | 0.05% | -0.22% | -0.04% | -0.01% | -0.09% | 0.02% | 0.03% | |
| CAD | 0.07% | -0.17% | -0.04% | 0.01% | -0.10% | 0.00% | 0.08% | |
| AUD | 0.17% | -0.04% | 0.08% | 0.09% | 0.10% | 0.13% | 0.20% | |
| NZD | 0.07% | -0.17% | -0.04% | -0.02% | -0.01% | -0.13% | 0.07% | |
| CHF | 0.02% | -0.24% | -0.11% | -0.03% | -0.08% | -0.20% | -0.07% |
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 finds interim support near 1.2620
The Pound Sterling finds temporary support near 1.2620 against the US Dollar. However, the near-term appeal is uncertain as the GBP/USD pair has slipped below the 20-day and 50-day Exponential Moving Averages (EMAs), which trade around 1.2700 and 1.2670, respectively.
The Cable also declines below 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 14-day Relative Strength Index (RSI) falls back into the 40.00-60.00 range, indicating that the upside momentum has faded.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
