- Pound Sterling is expected to dip to around 1.3480 against the US dollar as the Greenback gains traction before the US market opens.
- Market watchers are keeping an eye on the US ISM manufacturing PMI data, which is anticipated to show a further decline.
- The Bank of England is not likely to lower interest rates in its upcoming policy meeting.
Pound Sterling (GBP) is set to fall closer to 1.3480 against the US dollar (USD) during the European trading session on Tuesday. This drop coincides with the rise of the USD as markets were closed over the weekend for Labor Day, with investors looking forward to ISM and S&P Global Manufacturing Purchasing Manager Index (PMI) figures for August later in the North American trading session.
At the time of reporting, the US Dollar Index (DXY), which measures the dollar’s strength against six major currencies, climbed to nearly 98.00.
Economists expect the US ISM manufacturing PMI to register a modest uptick, with projections around 49.0, slightly above the prior reading of 48.0. It’s worth noting that any figure below 50 indicates a contraction in business activity.
Aside from the manufacturing PMI, investors will also watch related indexes like prices paid and employment to gauge the impact of US tariffs on inflation and job markets.
Daily Market Update: Pound Sterling’s Week on the UK Economic Calendar
- Pound Sterling remains mostly stable against its major counterparts this week, as the optimistic market sentiment is bolstered by expectations that the Federal Reserve will likely cut interest rates in September.
- In the near term, the key factor for the UK currency will be what the Bank of England decides regarding interest rates in their policy meeting.
- Recently, Catherine Mann, a member of the BOE Monetary Policy Committee, stated that interest rates should remain restrained for a longer period to address upcoming economic risks. Mann is against easing financial conditions given the persistent inflation in the UK.
- Looking forward, US labor market data—such as job openings for July, ADP employment changes, and non-farm payroll (NFP) figures—will influence the GBP/USD exchange rate.
- Investors will pay close attention to job figures to understand the current labor demand landscape, which has been affected by tariffs from the US on trade partners.
- Additionally, the outcome of the July NFP report is likely to heighten focus on the Fed’s upcoming decisions in September regarding interest rates.
Technical Insights: Pound Sterling Trading Below 1.3500
Pound Sterling has fallen below the 1.3500 mark against the US dollar on Tuesday. The overall trend for the GBP/USD pair is hovering near the 20-day exponential moving average (EMA) around 1.3468.
The currency has formed an inverted head and shoulder chart pattern on daily charts, with the neckline positioned approximately at 1.3580.
The 14-day relative strength index (RSI) is fluctuating between 40.00 and 60.00, indicating a potential decrease in market volatility.
On the downside, the August 11 low at 1.3400 serves as a significant support level, while the height from July 1, around 1.3790, acts as a notable resistance point.
