- The pound is trading around 1.3450 against the US dollar, facing various economic indicators like unemployment claims and durable goods orders.
- Officials from both the Federal Reserve and Bank of England have expressed concerns about increasing inflation risks.
- Boe Greene has noted a decreased risk of a trade war.
Pound Sterling (GBP) is showing caution around the 1.3450 mark in relation to the US Dollar (USD) during the Thursday European trading session. The GBP/USD pair is finding it tough to strengthen as the USD holds its ground ahead of key US economic data scheduled for release at 12:30 GMT.
At the time of writing, the US Dollar Index (DXY), which monitors the USD against six major currencies, is hovering near a two-week high of approximately 97.80 reached on Wednesday.
Market participants are closely monitoring the US first-time unemployment claims data for the week ending September 20th, seeking insights into the current labor market conditions. Recent statements from Federal Reserve officials suggest they are more focused on a weakening job market than on inflation, which remains significantly above the central bank’s 2% target.
The U.S. Department of Labor is anticipated to report an increase in the number of individuals filing for unemployment benefits, rising from a previous reading of 231k to an expected 235k. Expectations for a dovish Fed significantly rose earlier this month after claims spiked to 264k during the week ending September 6th, marking a four-year high.
In addition, investors will also keep an eye on durable goods orders data for August. Forecasts indicate a moderate decline of about 0.5%, following a 2.8% increase in July.
Another significant release on the US economic calendar is the final reading for the second quarter Gross Domestic Product (GDP) and the Personal Consumption Expenditure Price Index (PCE).
Investors Seek Insights on the UK’s Interest Rate Prospects
- The pound has remained relatively stable against major currencies on Thursday, as investors are eager for insights regarding potential interest rate cuts by the Bank of England (BOE) for the rest of the year.
- On Wednesday, Megan Greene, a member of the BOE Monetary Policy Committee, urged caution regarding further rate cuts, as inflation risks have now shifted towards rising profit concerns. She was part of the committee discussions that decided to keep interest rates steady during recent meetings. Last week, the BOE maintained the rates but reduced them by 25 basis points to 4% during the August policy meeting.
- Discussing the UK’s economic outlook, Greene mentioned a decrease in trade risks, while the central bank anticipates a growth rebound without significant threats to the labor market. She noted that businesses have already made numerous adjustments in response to increasing costs for insurance and minimum wage.
- At last week’s meeting, BOE Governor Andrew Bailey emphasized a “gradual and prudent” approach to any monetary easing.
- Meanwhile, the US dollar continues to be strong, as several Federal Open Market Committee officials, including Chairman Jerome Powell, have suggested that the US central bank should focus on further monetary policy expansion due to rising inflation risks. Yet, it seems no FOMC members are against a potential interest rate cut.
- On Wednesday, San Francisco Federal Reserve Bank Chair Mary Daly mentioned that further rate cuts might be necessary to help stabilize the job market. She stated, “Additional policy adjustments may be required as the Fed aims to restore price stability while supporting the labor market.”
Technical Analysis: The Pound Sterling’s Struggles Near 1.3450
The pound appears to be under pressure, trading close to 1.3450 against the US dollar on Thursday. The GBP/USD pair is positioned towards the lower edge of the ascending channel formation around 1.3470. The short-term trend remains bearish, with the 20-day exponential moving average acting as a crucial resistance around 1.3514.
The 14-day relative strength index (RSI) has significantly dropped below 50.00, indicating potential bearish momentum if it dips below 40.00.
Looking downward, the low point from August 1st at 1.3140 acts as an important support level, while the peak from July 1st, nearing 1.3800, serves as a key resistance point.
