Pound Sterling finds cushion despite firm BoE rate-cut bets

FXStreet
Updated Jun 24, 2024 08:49
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■The Pound Sterling finds support near 1.2620 against the US Dollar.

■UK’s economic outlook appears to be uncertain ahead of UK elections.

■The BoE is expected to start lowering interest rates in August.


The Pound Sterling (GBP) gains ground against the US Dollar (USD) and trades around 1.2650 in Monday’s London session after facing a sharp sell-off last week. The GBP/USD pair rebounds as the upside move in the US Dollar Index (DXY), which tracks the Greenback’s value against six major peers, appears to have paused and struggles to extend upside above the immediate resistance of 106.00.


However, the near-term outlook of the US Dollar has strengthened after the preliminary S&P Global Purchasing Managers Index (PMI) report for June showed that activities in the manufacturing and the service sector surprisingly expanded at a faster pace than expected. The report showed that the Composite PMI surprisingly jumped to 51.7. Investors expected the PMI data to decline to 51.0 from the prior release of 51.3.


The report also lifted the mood of Federal Reserve (Fed) policymakers as it said, “Selling price inflation has meanwhile cooled again after ticking higher in May, down to one of the lowest levels seen over the past four years. Historical comparisons indicate that the latest decline brings the survey’s price gauge into line with the Fed’s 2% inflation target.”


Daily digest market movers: Pound Sterling is underpinned against majority of currencies


The Pound Sterling performs strongly against its major peers, except the Euro, even though financial markets expect that the Bank of England (BoE) will start reducing interest rates from the August meeting. Market speculation for the BoE to begin lowering its key borrowing rates in August was boosted by a slightly dovish monetary policy statement commentary on the interest rate outlook.


In the monetary policy statement, policymakers said the decision to hold interest rates at 5.25% was “finely balanced”, which investors took it as a signal that rate cuts are around the corner.


Market expectations for BoE rate cuts have also strengthened as annual headline inflation has returned to the desired rate of 2%. In the press conference after the June meeting, BoE Governor Andrew Bailey acknowledged, “It’s good news that inflation has returned to our 2% target.” And “officials want to be sure that inflation should stay low which is why we have decided to leave interest rates unchanged.


Though price pressures have returned to 2%, officials worry about the risks of persistent service inflation. In May, service inflation decelerated at a slower pace to 5.7% from the prior release of 5.9%. Investors expected the underlying inflation to have declined to 5.5%.


Meanwhile, investors have become concerned over the United Kingdom’s (UK) economic outlook after the preliminary S&P Global/CIPS PMI report showed that the overall activity unexpectedly slowed in the service sector in June.  However, the Manufacturing PMI expanded at a faster pace than estimates and the former release. "The slowdown in part reflects uncertainty around the business environment in the lead-up to the general election, with many firms seeing a hiatus in decision-making pending clarity on various policies," the report said.


Pound Sterling Price Today:

British Pound PRICE Today


The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.


  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.19% -0.08% -0.05% -0.07% -0.17% -0.07% -0.02%
EUR 0.19%   0.13% 0.22% 0.17% 0.04% 0.17% 0.24%
GBP 0.08% -0.13%   0.04% 0.04% -0.08% 0.04% 0.11%
JPY 0.05% -0.22% -0.04%   -0.01% -0.09% 0.02% 0.03%
CAD 0.07% -0.17% -0.04% 0.01%   -0.10% 0.00% 0.08%
AUD 0.17% -0.04% 0.08% 0.09% 0.10%   0.13% 0.20%
NZD 0.07% -0.17% -0.04% -0.02% -0.01% -0.13%   0.07%
CHF 0.02% -0.24% -0.11% -0.03% -0.08% -0.20% -0.07%  


The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).


Technical Analysis: Pound Sterling finds interim support near 1.2620



The Pound Sterling finds temporary support near 1.2620 against the US Dollar. However, the near-term appeal is uncertain as the GBP/USD pair has slipped below the 20-day and 50-day Exponential Moving Averages (EMAs), which trade around 1.2700 and 1.2670, respectively.


The Cable also declines below the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.


The 14-day Relative Strength Index (RSI) falls back into the 40.00-60.00 range, indicating that the upside momentum has faded.

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

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