The Pound Sterling (GBP) displayed mixed performance against its major peers during Monday’s London session. The near-term outlook for the British currency remains firm following the Labour Party’s decisive victory under Keir Starmer, securing an outright majority over Rishi Sunak’s Conservative Party in the UK parliamentary elections. This political stability has bolstered confidence in UK financial markets.
Despite this stability, uncertainty surrounds the Bank of England’s (BoE) interest-rate outlook. While annual headline inflation has returned to the target rate of 2%, financial markets estimate a 50% chance that the BoE might begin reducing interest rates starting from the August meeting.
Investors this week will closely monitor the UK’s monthly Gross Domestic Product (GDP) and factory data for May, set to be released on Thursday. The UK economy is expected to have expanded by 0.2% following no change in April.
Daily Digest Market Movers: Pound Sterling Remains Firm Against US Dollar
The Pound Sterling holds gains near 1.2800 against the US Dollar (USD) in Monday’s European session. The GBP/USD pair strengthens as the US Dollar weakens following the US Nonfarm Payrolls (NFP) report for June, which indicated a moderating labor market.
The revised NFP data revealed that job creation in April and May was 111K fewer than previously estimated, and the Unemployment Rate unexpectedly rose to 4.1% from 4.0%. These signs of a loosening labor market have heightened expectations of early rate cuts by the Federal Reserve (Fed). Fed Chair Jerome Powell indicated that unexpected labor market weakness might prompt sooner-than-anticipated interest rate adjustments.
Additionally, Average Hourly Earnings, a key measure of wage growth influencing service inflation and consumer spending, softened on both a monthly and annual basis. According to the CME FedWatch tool, the probability of a rate cut in September has increased to 75.8% from 64% a week ago, with subsequent cuts expected in November or December.
This week, the focus will also be on the US Consumer Price Index (CPI) data for June, scheduled for release on Thursday. Economists anticipate the annual core CPI, excluding volatile food and energy prices, to have grown steadily by 3.4%.
Technical Analysis: Pound Sterling Near Three-Week High Around 1.2800
The Pound Sterling is trading near a fresh three-week high at 1.2820 against the US Dollar. The GBP/USD pair has climbed above the 78.6% Fibonacci retracement at 1.2770, from the March 8 high of 1.2900 to the April 22 low of 1.2300.
The pair has also risen above the 20-day and 50-day Exponential Moving Averages (EMAs) near 1.2695 and 1.2675, respectively, indicating a bullish near-term outlook. The 14-day Relative Strength Index (RSI) has risen above 60.00, and a sustained move above this level would shift momentum further towards the upside.
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