- The GBP/USD has risen this week to 1.3626 following the collapse of the ceasefire between Israel and Iran.
- Powell indicated that interest rate cuts can wait. He noted that tariffs might increase inflation and impact economic activity.
- UK data is sparse. Bank of England’s Ramsden highlighted concerns about the labor market, returning focus to the MPC’s discussions.
Pound Sterling continued to gain against the US dollar on Tuesday, as the ceasefire between Israel and Iran was broken, despite President Trump’s cautioning. However, a risk-taking sentiment persists. The GBP/USD traded above 1.3600, climbing over 0.65% after hitting a weekly peak of 1.3626.
Despite geopolitical tensions in the Middle East and July’s easing, Sterling is expected to increase by over 0.65% as market sentiment remains positive.
Ignoring geopolitical risks, Federal Reserve Chairman Jerome Powell, during his upcoming testimony to Congress, mentioned that rate cuts could be postponed. He remarked that “this year’s tariffs might elevate prices and detrimentally influence economic activity,” pointing out that the effects could be either short-term or more prolonged.
He countered previous comments from Fed governors Christopher Waller and Michelle Bowman, who were quite hawkish last year but have shown support for rate cuts at the July meeting.
Recently, Cleveland’s hawk, Beth Hammack, suggested that rate cuts might be “pending for a considerable time.” She echoed Raphael Bostic, the President of the Atlanta Fed, who indicated there’s currently no necessity for reductions, although he acknowledged a possible easing of 25 basis points this year.
U.S. housing data revealed a 2.7% year-over-year increase in home prices as of April. On the other side of the Atlantic, the UK’s economic reports are minimal, with a recent survey showing a decline in production output from -25 to -23 in June. The poll indicated that “manufacturers predict a slower production pace leading into June.”
Bank of England Governor Dave Ramsden remarked that “notable evidence regarding the labor market” influenced his recent decisions. He noted that the labor market’s weaknesses are commanding his attention.
Traders are poised for Powell’s forthcoming testimony in the House of Representatives.
Wednesday will see comments from members of the Bank of England’s Monetary Policy Committee (MPC); meanwhile, Powell will be in the Senate.
GBP/USD Price Forecast: Technical Outlook
The GBP/USD maintains an upward trend after a brief dip to the 50-day SMA at 1.3407. Since then, the pair seems poised to surge above 1.3600 decisively.
Momentum remains positive, as indicated by the relative strength index (RSI). Yet, traders should be alert to looming geopolitical risks. An escalation in Middle Eastern conflicts could lead to potential pullbacks.
If GBP/USD weakens, the initial support will likely be at 1.3550.
