Pound Sterling rises slightly despite renewed UK financial concerns.

• Sterling is expected to trade solidly against the USD as investors shift focus from the confirmation of the USD trade agreement.
• Trump plans to lower Japanese tariffs to 15%, down from an already set 25%.
• The British government recorded its second-highest borrowing in June since 1993.

The pound (GBP) gained against most of its counterparts on Wednesday, except for the Australian dollar. Even with the re-emergence of fiscal concerns in the UK, the currency still attracted interest following the government borrowing update from the Office of National Statistics (ONS) released on Tuesday.

This report highlighted that the administration borrowed a significant amount—its second-highest since 1993—to help manage increasing debt costs. Obviously, this raises questions about potential tax hikes in upcoming statements.

At the same time, investors are looking ahead to the preliminary S&P Global Purchasing Manager Index (PMI) data for July, which is due out Thursday. All eyes will be on whether the employment trends in the UK private sector are continuing to slow down, as businesses have been cautious in hiring to manage rising social security costs.

Economists predict a slight dip in the overall PMI to 51.9, down from 52.0 in June. While this still indicates business activity is growing, the pace appears to be easing.

On the monetary policy side, market watchers think the Bank of England (BOE) is poised to lower interest rates at its upcoming Monetary Policy Conference in August. Major financial firms like Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs are suggesting a 25 basis points cut at next month’s meetings.

Daily Digest Market Mover: Pound Sterling extends third trading day victory streak against the US dollar

• The pound is approaching 1.3540 against the USD during Wednesday’s European session. The GBP/USD pair shows strength as the USD struggles despite the trade deal announcement with Japan.
• The US Dollar Index (DXY), which measures the USD against six key currencies, is hanging around 97.45—close to a two-week low hit on Tuesday.
• On social media, Trump announced the confirmed trade deal with Japan, stating they’d open their economy to US businesses with $550 billion in investments.
• “Japan will reduce tariffs to 15% on various goods,” he said, adding that the US also signed bilateral agreements with the Philippines on the same day.
• This deal comes as both nations face their political uncertainties.
• Looking ahead, investors are anticipating July’s Flash US PMI data on Thursday, which is expected to show quicker growth, backed by expansions in manufacturing and services.
• Interest rate cut expectations for the Federal Reserve’s September meeting have diminished, as analysts believe the effects of recently imposed tariffs are already reflected in prices.
• The CME FedWatch tool now shows a lower probability—58.7%—for a rate reduction compared to a month ago’s 69.6%.

Technical Analysis: Pound Sterling is over 1.3500

The pound is trading near the Tuesday high above 1.3500 against the dollar. The GBP/USD pair is attempting to exceed the 20-day exponential moving average (EMA) of around 1.3520. Success here could indicate a bullish short-term trend.

The 14-day relative strength index (RSI) is hovering close to 50.00, reflecting indecision among traders and some interest in buying at lower prices.

In terms of support, the May 12 low at 1.3140 remains crucial, while the peak around 1.3790 on July 1 is seen as a key resistance level.

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