- Jobless claims decrease to 217k, surprising some; however, PMI data is encouraging.
- UK Flash PMI points to rising layoffs, bolstering expectations for a BOE rate cut in August.
- Interest rate disparity supports the dollar as the BOE considers cuts while the Fed stays put.
The GBP/USD rally has hit a snag, with the dollar recovering and pushing the pair down over 0.24%. This follows three days of gains, yet the price didn’t quite reach 1.3600. Positive economic data from the U.S. has prompted investors to reconsider the likelihood of further cuts from the Federal Reserve, placing the pair at 1.3548.
Cable dips 0.24% to 1.3548 as positive job claims and PMI data reduce Fed cut expectations and widen interest rate gap
The U.S. Bureau of Labor Statistics reported that claims for the week ending July 19 were surprisingly below estimates at 217,000, down from 221,000 the previous week—lower than the forecast of 227,000. This marks the lowest level since mid-April. However, ongoing claims remain high at 1.96 million, indicating that many unemployed individuals are still struggling to secure new positions.
This situation may signal a potential rise in unemployment rates, expected to hit 4.2% in the non-farm payroll report due next week.
Mixed results emerged from the latest S&P Global reports on U.S. business activities for July. Manufacturing contracted, dropping the index from 52 to 49.5, while service PMI ticked up to 55.2, surpassing predictions of over 53 from 52.9 in June.
In the UK, Flash PMI reflected a slight uptick in business activity for July, but layoffs occurred at their fastest rate in five months, according to S&P. A further weakening in the UK labor market may push the Bank of England (BOE) towards an interest rate cut in August.
Currently, investors anticipate an 80% chance that the BOE will cut rates by a quarter point during its August meeting. Traders are predicting a cumulative reduction of 42 basis points, while the Fed is expected to keep rates steady in their upcoming decision. This interest rate disparity is likely to bolster the dollar, suggesting further downside for GBP/USD.
Looking ahead, UK retail sales figures are set for release on July 25th, while durable goods orders will be out before the Federal Open Market Committee (FOMC) policy decision on July 30th.
GBP/USD Price Forecast: Technical Perspective
The GBP/USD pair dropped below the key 20-day simple moving average (SMA) at 1.3555, indicating that buyers may lack the momentum to push prices above 1.3600. The relative strength index (RSI) suggests diminishing bullish momentum, as sellers appear to take control.
Should GBP/USD close below the July 23rd low of 1.3515, it could form a “bearish siege chart pattern.”
If weakness persists, GBP/USD might test this week’s low around 1.3402, with a low of 1.3369 noted on June 23rd. On the other hand, if buyers gain strength and push the pair above the 20-day SMA, a test at 1.3600 could be possible.
British Pound Performance This Week
The table below illustrates the weekly performance of the British pound (GBP) against major currencies, highlighting its strength relative to the US dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.22% | -0.87% | -0.84% | -0.64% | -1.35% | -1.19% | -0.82% | |
| EUR | 1.22% | 0.43% | 0.41% | 0.57% | -0.16% | -0.15% | 0.37% | |
| GBP | 0.87% | -0.43% | -0.24% | 0.18% | -0.56% | -0.37% | 0.13% | |
| JPY | 0.84% | -0.41% | 0.24% | 0.19% | -0.48% | -0.41% | 0.19% | |
| CAD | 0.64% | -0.57% | -0.18% | -0.19% | -0.64% | -0.55% | -0.23% | |
| AUD | 1.35% | 0.16% | 0.56% | 0.48% | 0.64% | 0.09% | 0.66% | |
| NZD | 1.19% | 0.15% | 0.37% | 0.41% | 0.55% | -0.09% | 0.50% | |
| CHF | 0.82% | -0.37% | -0.13% | -0.19% | 0.23% | -0.66% | -0.50% |
The heatmap visualizes the changes in major currencies, with the selected base currency determining the rows and the estimated currencies across the columns. For instance, comparing the British pound (GBP) against the US dollar (USD) shows the respective rate of change.
