- The US dollar remains strong, putting pressure on the pound sterling, which is trading weakly around 1.3350 against it.
- Investors are anticipating a decision from the Federal Reserve regarding interest rates on Wednesday.
- UK inflation is rising, which is affecting household spending.
The pound sterling (GBP) is hanging around 1.3350 US dollars (USD), hitting a near two-month low during Tuesday’s European session. The GBP/USD pair is under pressure, largely because the US dollar is holding firm after the US and EU reached a trade agreement just before the tariff deadline this weekend.
Currently, the US Dollar Index (DXY), which monitors the dollar’s performance against six major currencies, is nearly at 98.70.
The attractiveness of the US dollar has increased as the US-EU trade deal alleviates concerns over potential supply chain disruptions, given their substantial business ties.
Meanwhile, traders are looking ahead to high-stakes trade discussions between the US and China, beginning Monday in Stockholm. A report from the South China Morning Post indicated that the two nations might extend their 90-day tariff halt, which is set to expire on August 12th.
Daily Digest Market Mover: Challenges for Pound Sterling
- The pound is being cautiously traded as it continues to struggle against other currencies. Its performance has dipped over the past week due to a cooling labor market and escalating inflation. This situation is prompting potential action from the Bank of England regarding their upcoming monetary policy announcement.
- As inflation pressures mount, households are feeling the squeeze. A survey from the British Federation of Industrial Federations (CBI) revealed that retail sales have dropped for the 10th consecutive month in July, although the decline was less severe than in June.
- Companies have noted that rising costs and economic uncertainty are significantly impacting household demand, a trend striking since October 2024.
- Traders seem to expect a rate cut from the Bank of England during its meeting in August.
- This week, the GBP/USD exchange rate will likely be influenced by the Federal Reserve’s monetary policy announcement on Wednesday. The Fed is anticipated to keep interest rates steady at 4.25%-4.50% for the fifth time in a row.
- Investors will also focus on the US job openings data for June, set to be released at 14:00 GMT. Economists predict a decline in job listings to 7.55 million, down from 7.77 million in May.
Technical Analysis: Pound Sterling Trends
The pound is trading close to 1.3350 against the US dollar as of Tuesday’s update, marking the lowest level seen in about two months. The GBP/USD pair has struggled following a failed head and shoulders pattern and has dipped below the neckline near 1.3413.
Trading under the 20-day exponential moving average of roughly 1.3483 suggests a bearish short-term trend.
The 14-day relative strength index (RSI) has dropped below 40.00, indicating increasing bearish momentum.
Support is evident around the May 12 low of 1.3140, while the high from July 1, near 1.3790, represents a key resistance point.
Economic Indicators
JOLTS Job Openings
The JOLTS report, conducted by the US Bureau of Labor Statistics, offers insights into job vacancies, collecting data from employers across sectors, including retail and manufacturing.
