The Pound Sterling (GBP) maintained its strength above the crucial 1.3000 level against the US Dollar (USD) during Wednesday’s London session, building on gains from the previous day when the GBP/USD pair reached fresh year-to-date highs near 1.3050. This surge was largely attributed to a weakening US Dollar.
The US Dollar Index (DXY), which measures the Greenback against six major currencies, found temporary support after dipping to around 101.30, its lowest level in over seven months. Market sentiment remains largely bearish on the Dollar amid growing speculation that the Federal Reserve (Fed) may begin cutting interest rates as soon as September. Investors appear convinced of an impending Fed pivot toward policy normalization, though there is uncertainty about the magnitude of the initial rate cut after years of tightening.
Investors are now keenly awaiting the release of the Federal Open Market Committee (FOMC) minutes from July’s meeting, scheduled for 18:00 GMT. While the Fed left its key borrowing rates unchanged at 5.25%-5.50%, it signaled uncertainty about the economic outlook and emphasized vigilance regarding inflation and employment risks.
Attention is also focused on Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium, set to occur from Thursday to Saturday, with Powell speaking on Friday at 14:00 GMT. While Powell is unlikely to outline a specific policy path, he is expected to affirm the Fed’s readiness to adjust its stance if risks arise that could hinder the achievement of its goals.
Market Movers: BoE’s Bailey Speech in Focus as Investors Gauge Rate Cut Prospects
On Wednesday, the Pound Sterling showed mixed performance against major currencies as investors anticipated the Bank of England (BoE) Governor Andrew Bailey’s speech at the Jackson Hole Symposium on Friday. Bailey’s remarks are expected to provide insights into whether the BoE will proceed with another rate cut in September.
Expectations for a BoE rate cut in September have risen following July’s UK Consumer Price Index (CPI) report, which showed core inflation slowing more than anticipated, dropping to 3.3% from an expected 3.4%. Additionally, UK service inflation, a key measure for BoE officials, fell sharply to 5.2% due to easing wage pressures.
Supporting this outlook, human resources data provider Brightmine reported that pay awards in the three months to July decreased to 4.5% from 5% previously. “Employers that have made pay awards so far this year have already reacted to the falling inflation environment by implementing lower pay awards than last year,” said Sheila Attwood, senior content manager at Brightmine, according to Reuters.
On the economic front, investors will closely watch the UK’s preliminary S&P Global Purchasing Managers’ Index (PMI) data for August, set for release on Thursday. Economists predict that the flash Manufacturing PMI will remain steady at 52.1, while service sector activity is expected to improve slightly to 52.8 from 52.5.
Technical Analysis: Pound Sterling Hits Fresh Annual High
The Pound Sterling reached a new annual high of 1.3050 against the US Dollar, continuing to move higher within a Rising Channel pattern, where each pullback is seen as a buying opportunity. The upward-sloping 20-day Exponential Moving Average (EMA) around 1.2875 indicates a bullish near-term trend.
Additionally, the 14-period Relative Strength Index (RSI) remains in the bullish range of 60.00-80.00, signaling strong upward momentum.
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