- Pound Sterling is set to gain against key currencies on Monday, as a potential trade agreement between the UK and the EU approaches.
- The recent downgrade of the US credit rating by Moody’s has had a negative impact on the US dollar.
- Experts believe the Federal Reserve is unlikely to lower interest rates this year.
Pound Sterling (GBP) is making headway at the start of the week, performing well against most currencies, except the Euro (EUR). This boost comes in light of an upcoming UK-EU Trade Summit in London. Since Brexit, investors have been keenly observing possible trade deals aimed at enhancing economic connections.
A potential agreement between the UK and the EU could benefit various UK sectors, including defense, agriculture, and energy. This was noted by William Bain, director of trade policy at the UK Chamber of Commerce, during a recent discussion. Bain mentioned that a non-binding defense pact could open up a market worth around 150 billion euros for UK arms suppliers, while efforts to streamline agricultural dealings aim to eliminate non-tariff barriers.
Last week, the positive UK GDP report also bolstered the currency, indicating a solid growth rate of 0.7% in the first quarter.
This week, attention turns to the UK’s Consumer Price Index (CPI) data for April, which could provide insights on the Bank of England’s (BOE) monetary policy. The release is scheduled for Wednesday, with expectations for core CPI, excluding volatile items like food and energy, to grow from 3.4% to 3.6%.
Market Movement: Pound Sterling Rebounds Against US Dollar
- Pound Sterling is expected to rise to about 1.3370 against the US Dollar (USD) during Monday’s European session. This trend is influenced by Moody’s recent downgrade of the US’s credit rating. Although the agency states that this downgrade does not reflect a loss of confidence in the US government or the Federal Reserve.
- The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, has slipped to around 100.40.
- Positive remarks from President Trump regarding trade discussions with China have also improved the dollar’s outlook. His commitment to engage with Chinese leadership may alleviate concerns about economic instability.
- Despite recent tariff adjustments from the White House, expectations that the Fed will not lower interest rates soon have further supported the US dollar.
- A Morgan Stanley report suggests that the Fed is unlikely to make any cuts to interest rates before March 2026, indicating that ongoing tension is reducing risks of severe disruptions in trade.
- According to the CME FedWatch tool, there are predictions of two rate cuts by the Fed later this year, starting from September.
- Additionally, rising consumer inflation expectations have been noted. A University of Michigan report indicated a rise to 7.3% from a previous 6.5%.
Technical Analysis: Pound Sterling Approaches 1.3370
Pound Sterling is set to rise above 1.3370 against the US dollar on Monday. The GBP/USD pair remains above the 20-day exponential moving average (EMA) around 1.3270, suggesting a bullish short-term trend.
The 14-day relative strength index (RSI) shows an upward trend within the 40.00-60.00 range. A rise above 60.00 could signal further bullish momentum.
Importantly, the resistance level is around 1.3445, while a critical support area lies at the psychological mark of 1.3000.
