- 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 falls on backfoot
- The Pound Sterling exhibits weakness against its major peers from North America, Europe, and the Japanese Yen (JPY) but is outperforming against Asia-Pacific currencies in Tuesday’s session. The British currency has come under pressure as 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 | 0.08% | -0.14% | 0.00% | -0.12% | 0.00% | 0.20% | 0.03% | |
| EUR | -0.08% | -0.24% | -0.12% | -0.27% | -0.07% | 0.11% | -0.07% | |
| USD | 0.14% | 0.24% | 0.10% | -0.02% | 0.16% | 0.35% | 0.18% | |
| JPY | 0.00% | 0.12% | -0.10% | -0.12% | 0.07% | 0.22% | 0.05% | |
| CAD | 0.12% | 0.27% | 0.02% | 0.12% | 0.18% | 0.37% | 0.18% | |
| AUD | -0.01% | 0.07% | -0.16% | -0.07% | -0.18% | 0.18% | 0.00% | |
| NZD | -0.20% | -0.11% | -0.35% | -0.22% | -0.37% | -0.18% | -0.18% | |
| CHF | -0.03% | 0.07% | -0.18% | -0.05% | -0.18% | -0.00% | 0.18% |
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 falls to near 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.
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.
