Market Update: GBP/USD Falls Below 1.3400
- GBP/USD slipped below 1.3400 on Monday as the US dollar regained strength.
- The absence of significant UK economic reports has allowed US data to take center stage.
- Upcoming US data includes GDP figures, Federal Reserve rate expectations, PCE inflation, and a Non-Farm Payroll report.
At the start of the trading week, GBP/USD dropped for the third consecutive session, falling under the 1.3400 mark and hitting a ten-week low. This decline comes as the US dollar strengthens following a prolonged period of weakness, placing downward pressure on the pound sterling.
The economic calendar seems quite empty for the UK, with no notable data releases on the horizon. However, traders dealing with GBP/USD will likely remain occupied by a wealth of data expectations from the US.
This Week’s Focus on US Data
On Wednesday, the second quarter GDP figures from the US are due, followed closely by the Federal Reserve’s interest rate decisions. Economists anticipate a rebound in annual GDP to 2.4%, up from -0.5% in Q1. There’s also an expectation for the GDP price index to ease from 3.8% to 2.4%. The Fed is under pressure from the Trump administration to decrease interest rates, but it’s largely believed that they will hold rates steady this week, possibly considering a cut in September.
On Thursday, the core Personal Consumption Expenditures (PCE) inflation data for June will be released. Indicators suggest headline inflation will show an increase, now projected to rise to 0.3% month-on-month from the previous figure of 0.2%. This increase comes amidst scrutiny of the Trump administration’s trade and tariff policies.
Friday will wrap up the week with the latest Non-Farm Payroll (NFP) data, where a slight decline in job additions is expected. Analysts forecast around 110,000 new jobs for July, a reduction from June’s 147,000.
As the bearish momentum grows, GBP/USD faces renewed pressure. After briefly peaking near 1.3800, it could not maintain those levels and is now trending downwards, approaching a critical moving average below 1.3500. The pair has also broken through a significant bullish trend line and is heading towards a 200-day exponential moving average around 1.3130.
GBP/USD Daily Chart
Regarding the Pound Sterling (GBP), it holds the title of the world’s oldest currency, having been established in 886 AD. Currently, it ranks fourth in global forex trading, representing about 12% of all transactions. Its primary trading pair is GBP/USD, commonly referred to as “cable.”
Monetary policy from the Bank of England plays a pivotal role in influencing GBP’s value. The BOE aims to maintain price stability, usually around a 2% inflation rate, primarily through interest rate adjustments. Higher interest rates can attract foreign investment, bolstering GBP, while lower rates might be considered to stimulate growth in a sluggish economy.
Economic data like GDP growth, manufacturing, and employment figures are also crucial for predicting GBP’s movements. A healthy economy tends to strengthen the pound, while weak data can lead to declines.
Trade balance is another important indicator for the pound. It assesses the earnings from exports against spending on imports. A country that exports successfully sees demand for its currency increase, strengthening it further, while a negative trade balance can have the opposite effect.
