- The GBP/USD experienced sideways movement on Monday as traders braced for a significant influx of data.
- Technical indicators faded, and price movements are now closely aligned with the main averages.
- Tuesday brings key UK labor statistics and US CPI inflation rates for cable traders to digest.
The GBP/USD has been fluctuating around 1.3430, with traders feeling the pressure from the substantial data set to release on both sides of the Atlantic on Tuesday. UK labor figures will emerge during the London market session, while the US Consumer Price Index (CPI) inflation data is slated for the latter part of the US trading day.
The latest updates regarding job counts for July are expected on Tuesday, revealing employment changes for the three months ending in July: net employment in the UK is projected to drop from 25.9k to around 20.8k, but the ILO unemployment rate is predicted to hold steady at about 4.7% for that same timeframe.
UK Employment and US CPI Inflation on the Horizon
The UK has recently faced the uncertainty of economic policy, impacting businesses and decision-makers alike. The government is contending with a budget under strain, which could disrupt meaningful investment choices. The recent interest rate cuts by the Bank of England (BOE) were largely expected, but future cuts may need a firmer understanding of the UK economy’s health.
On the US side, CPI inflation data for July is set to be released on Tuesday, drawing heightened interest from investors. Both headline and core CPI are anticipated to show annual increases, and there’s hope that these increases will remain moderate enough not to derail the Fed’s current path of rate reductions. Specifically, headline CPI is expected to rise from 2.7% to 2.8% year-on-year, while core CPI might climb to 3.0% from 2.9%.
GBP/USD Price Outlook
The GBP/USD is hovering near the 50-day Exponential Moving Average (EMA) around 1.3430. Depending on how the data unfolds on Tuesday, the near-term bullish momentum may either continue or falter, although current technical patterns suggest a potential shift toward bearish sentiment in the near future.
GBP/USD Daily Overview
Pound Sterling FAQ
Pound Sterling (GBP), the oldest currency still in use, dates back to 886 AD. As of 2022, it ranks as the fourth most commonly traded currency globally, making up 12% of all transactions with an average daily volume of $630 billion. Its primary trading pair is GBP/USD, often called “cable,” which represents 11% of FX transactions.
Monetary policy from the Bank of England is the chief factor influencing the pound’s value. The BOE aims for a stable inflation rate of around 2%, and adjustments to interest rates are its main tool. If inflation climbs too high, the BOE may raise interest rates, making borrowing costlier and, generally, making GBP more appealing to international investors. Conversely, if inflation is too low and economic growth slows, the BOE might cut rates to stimulate the economy.
Economic data also plays a crucial role in assessing the pound’s strength. Metrics like GDP, manufacturing and services PMIs, and employment figures contribute to the overall economic outlook. A strong economy can attract foreign investment, prompting potential rate hikes from the BOE, thereby boosting GBP. Weak economic data, however, can have the opposite effect.
The trade balance is another key indicator for Pound Sterling. This data reflects the difference between a country’s exports and imports over time. A positive trade balance can bolster currency strength, driven by increased demand for a country’s goods from foreign buyers.
