Articles
USD/CAD rises above 1.3700 ahead of Core PCE inflation
398997 June 28, 2024 16:41 FXStreet Market News
- USD/CAD extends its winning streak due to higher yields on US Treasury bonds.
- US Core PCE inflation, the Fed’s preferred inflation gauge, is forecasted to decrease to 2.6% YoY from the previous 2.8% reading.
- CanadaÂ’s GDP (MoM) is expected to grow by 0.3% in April, against the neutral growth observed in March.
USD/CAD continues to gain ground for the fourth consecutive day, trading around 1.3710 during the European session on Friday. Investors await FridayÂ’s Core PCE Price Index inflation, which is projected to decrease year-over-year to 2.6% from the previous 2.8%. This data is seen as the Federal Reserve’s (Fed) preferred inflation gauge.
Higher yields on US Treasury bonds support the US Dollar (USD) and underpin the USD/CAD pair. This could be attributed to the emergence of risk aversion after the US economy showed an expansion on Thursday. Gross Domestic Product Annualized expanded by 1.4% in Q1, slightly higher than the previous reading of 1.3%, but continuing to point to the lowest growth since the contractions in the first half of 2022.
US Dollar Index (DXY), which measures the value of the US Dollar against six other major currencies, holds ground above 106.00 with 2-year and 10-year US yields standing at 4.72% and 4.29%, respectively, at the time of writing.
Federal Reserve (Fed) Board of Governors member Michelle Bowman noted on Thursday that she is still not ready to support a central bank rate cut with inflation pressures still elevated. Bowman said, adding “We are still not yet at the point where it is appropriate to lower the policy rate, and I continue to see some upside risks to inflation,” per Reuters.
Read the full article: Inflation should ease with current Fed policy
On the Canadian DollarÂ’s (CAD) side, Statistics Canada is scheduled to release the country’s GDP (MoM) later in the North American session. CanadaÂ’s economy is expected to grow by 0.3% in April, compared to the neutral growth observed in March.
Higher crude Oil prices limit the downside of the commodity-linked CAD, given the fact that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) crude Oil price extends gains for the third successive day, trading near $81.90 during the European session on Friday. Crude Oil prices are set to advance for the third straight week due to supply threats, which could be attributed to an escalating conflict in the Middle East.
Economic Indicator
Gross Domestic Product (MoM)
The Gross Domestic Product (GDP), released by Statistics Canada on a monthly and quarterly basis, is a measure of the total value of all goods and services produced in Canada during a given period. The GDP is considered as the main measure of Canadian economic activity. The MoM reading compares economic activity in the reference month to the previous month. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.
Trump wins, Europe to provide consumer price data – UBS
398995 June 28, 2024 16:40 FXStreet Market News
Polls declared former President Trump the winner immediately after the US presidential debate. Consumer spending figures follow negative revisions within first quarter GDP, UOB strategist Paul Donovan notes. Europe to provide preliminary June consumer price data.
Trump wins the debate, European data ahead
“Polls immediately after the US presidential debate declared former President Trump the winner. This invites increased investor scrutiny of Trump’s policies, especially around trade. The economic consequences of tariffs are relatively obvious, but there is uncertainty about how many campaign pledges will translate into policy action.”
“The cold economic realities offer US May consumer spending and income data, and the price deflator. While price data is the focus, consumer spending figures follow negative revisions within first quarter GDP. The monthly change in the consumer spending deflator should be benign, and the main concern about US inflation amongst economists is why Federal Reserve Chair Powell has seemingly not noticed rising real interest rates.”
“Japan’s Tokyo area consumer price inflation rose slightly more than expected. Recent increases keep the focus on Bank of Japan (BoJ) policy. France and Spain both offer preliminary June consumer price data. The UK revised up its first quarter GDP by a small amount, but small changes in abstract ideas has little relevance to people living in the real world.”
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EUR/USD: A break below 1.0640 to trigger a sustained decline – UOB Group
398994 June 28, 2024 16:17 FXStreet Market News
The Euro (EUR) is likely to trade in a range of 1.0685/1.0730 and remain under pressure. ThereÂ’s a chance of a sustained decline for EUR/USD, but only if it can break below 1.0640, UOB Group analysts note.
The pair remains sidelined
24-HOUR VIEW: “Yesterday, we indicated that EUR ‘could decline further, but it is not clear if it can break the significant support level at 1.0640.’ Our view was incorrect, as EUR rebounded to 1.0726, closing at 1.0702 (+0.22%). The price action is likely part of a consolidation phase. Today, we expect EUR to trade in a range of 1.0685/1.0730.”
1-3 WEEKS VIEW: “Our update from yesterday (27 Jun, spot at 1.0702) is still valid. As indicated, downward momentum is building again, but at this stage, it does not appear to be enough to suggest the start of a sustained decline. Furthermore, there is a significant support level at 1.0640. That said, provided that 1.0735 (no change in ‘strong resistance’ level from yesterday) is not breached, EUR is likely to remain under pressure, but a sustained decline is likely only if it can break clearly below 1.0640.”
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Spain Current Account Balance declined to €2.83B in April from previous €3.29B
398993 June 28, 2024 16:17 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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Italy Industrial Sales s.a. (MoM) rose from previous -2.9%Â to 0.8% in April
398992 June 28, 2024 16:06 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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US core PCE inflation set to cool in May, reinforcing Federal Reserve rate cut bets for September
398991 June 28, 2024 16:05 FXStreet Market News
- The core Personal Consumption Expenditures Price Index is set to rise 0.1% MoM and 2.6% YoY in May.
- Markets see a nearly 40% probability that the Federal Reserve will leave the policy rate unchanged in September.
- A hot PCE inflation report could provide a boost to the US Dollar heading into the weekend.
The core Personal Consumption Expenditures (PCE) Price Index, the US Federal ReserveÂ’s (Fed) preferred inflation measure, will be published on Friday by the US Bureau of Economic Analysis (BEA) at 12:30 GMT.
PCE index: What to expect in the Federal ReserveÂ’s preferred inflation measure
The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.1% on a monthly basis in May, at a softer pace than the 0.2% increase recorded in April. May core PCE is projected to grow at an annual pace of 2.6%, while the headline annual PCE inflation is also forecast to edge lower to 2.6%.
The US Bureau of Labor Statistics (BLS) reported earlier in the month that the Consumer Price Index (CPI) rose 3.3% on a yearly basis in May, while the core CPI increased 3.4% in the same period, down from 3.6% in April.
Previewing the PCE inflation report, “CPI and PPI data suggest core PCE inflation lost further momentum in May, with the series advancing 0.13% m/m — its lowest monthly gain of the year and following a 0.25% April expansion,” TD Securities analysts said. “We also look for the headline PCE and the supercore to print 0.0% each in May. Separately, personal spending likely advanced 0.3% m/m, with income rising 0.4%”, they added.
When will the PCE inflation report be released, and how could it affect EUR/USD?
The PCE inflation data is slated for release at 12:30 GMT. The monthly core PCE Price Index gauge is the most-preferred inflation reading by the Fed, as itÂ’s not distorted by base effects and provides a clear view of underlying inflation by excluding volatile items. Investors, therefore, pay close attention to the monthly core PCE figure.
The CME Group FedWatch Tool shows that markets currently price in a 37.7% probability of the Federal Reserve (Fed) leaving the policy rate unchanged in September. This market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the event.
In case the monthly core PCE rises 0.2%, or more, in May, the immediate market reaction could cause investors to refrain from pricing in a rate reduction in September and help the USD outperform its rivals. On the other hand, a reading of 0.1%, or lower, could trigger a USD selloff ahead of the weekend and open the door for a leg higher in EUR/USD.Â
Investors, however, could remain reluctant to bet on a steady recovery in the Euro ahead of the first round of French elections on Sunday, even if the PCE inflation figures make it difficult for the USD to find demand. In addition, the data will be released on the last trading day of the second quarter. Hence, quarter-end flows and position adjustments could ramp up market volatility and cause the USD to move irregularly.
FXStreet Analyst Eren Sengezer offers a brief technical outlook for EUR/USD and explains:
“Despite several recovery attempts seen in the last couple of weeks, the Relative Strength Index (RSI) indicator on the daily chart stays below 50, reflecting buyer’s hesitancy. Furthermore, EUR/USD remains within the descending regression channel coming from early June.”
“1.0740 (upper limit of the descending channel) aligns as first resistance. Once EUR/USD rises above this level and stabilizes there, 1.0790-1.0800 (100-day Simple Moving Average (SMA), 200-day SMA, psychological level) could be seen as the next resistance before 1.0900. On the downside, 1.0660 (mid-point of the descending channel) aligns as first support before 1.0600 (lower limit of the descending channel).”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the FedÂ’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the FedÂ’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal ReserveÂ’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Italy Industrial Sales n.s.a. (YoY): -2% (April) vs -5.1%
398990 June 28, 2024 16:03 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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USD/JPY posts fresh multi-decade high above 161.00 ahead of US Inflation release
398989 June 28, 2024 16:02 FXStreet Market News
- USD/JPY rises above 161.00 amid firm US Dollar ahead of the US Core PCE Inflation.
- US inflation data is expected to have softened in May.
- Fears of JapanÂ’s intervention have intensified as Yen weakened to 161.00 against the US Dollar.
The USD/JPY pair prints a fresh multi-decade high at 161.28, its highest since 1986, on Friday. The asset rises further as the US Dollar (USD) strengthens amid uncertainty ahead of the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday.
The US underlying inflation data will provide cues about when and how much the Federal Reserve (Fed) will reduce interest rates this year. The US PCE report is expected to show that price pressures grew at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April.
A scenario in which price pressures decline expectedly or more would boost expectations of early rate cuts by the Fed. Currently, financial markets expect that the Fed will start reducing interest rates from the September meeting. The Fed is also expected to deliver two rate cuts this year against one indicated by officials in the latest dot plot.
Meanwhile, the Japanese Yen weakens even though Bank of Japan (BoJ) signalled further policy tightening to ease price pressures, which have been recently boosted by weak Yen that has prompted exports and increased import costs.
Sheer weakness in the Japanese Yen has also prompted expectations of JapanÂ’s stealth intervention. In an early Asian session, Japanese Finance Minister Shunichi Suzuki said on Friday that the authorities were “deeply concerned” about the impact of “rapid and one-sided” foreign exchange moves on the economy, Reuters reported.
Economic Indicator
Core Personal Consumption Expenditures – Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal ReserveÂ’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Germany Unemployment Change came in at 19K, above expectations (15K) in June
398987 June 28, 2024 15:57 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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Germany Unemployment Rate s.a. above forecasts (5.9%) in June: Actual (6%)
398986 June 28, 2024 15:56 FXStreet Market News
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
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Pound Sterling trades sideways ahead of US core PCE Inflation
398984 June 28, 2024 15:41 FXStreet Market News
- The Pound Sterling exhibits a subdued performance against the US Dollar ahead of the US core PCE Inflation for May.
- Revised UK Q1 GDP estimates show that the economy grew at a higher pace of 0.7%.
- Fed policymakers expect rate cuts at this time are inappropriate.
The Pound Sterling (GBP) trades subdued against the US Dollar (USD) in FridayÂ’s London session. The GBP/USD pair edges down this week as investors remain cautious ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday.Â
The core PCE inflation data, the Federal ReserveÂ’s (Fed) preferred inflation measure, is estimated to have decelerated to 2.6% year-over-year (YoY) from AprilÂ’s reading of 2.8%. On a monthly basis, the underlying inflation is expected to have grown modestly by 0.1% against the prior increase of 0.2%.
Soft inflation figures would boost expectations of early rate cuts by the Fed, while hot numbers will diminish Fed rate-cut prospects and strengthen the US DollarÂ’s appeal. At the time of writing, the US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, trades close to the crucial resistance of 106.00.
According to the CME FedWatch tool, 30-day fed funds futures pricing data suggest that traders have priced in two rate cuts this year, and the policy-easing cycle will begin at the September meeting. On the contrary, Fed officials advocate for keeping interest rates at their current levels until they are convinced that inflation will decline to the desired rate of 2%.
On Thursday, Fed Governor Michelle Bowman reiterated that the central bank is not yet at a point where it is appropriate to reduce interest rates. She warned of more rate hikes if progress in disinflation appears to stall or reverse.
Daily digest market movers: Pound Sterling outperforms its major peers
- The Pound Sterling strengthens against its entire peers after the United Kingdom (UK) Office for National Statistics (ONS) reported in its revised Q1 Gross Domestic Product (GDP) report that the economy expanded at a higher rate of 0.7% quarter on quarter (QoQ) than estimates and the preliminary release of 0.6%. On an annualized basis, the economy grew by 0.3%, upwardly revised from 0.2%.Â
- Meanwhile, uncertainty ahead of UK elections and the timing of the Bank of England (BoE) rate cut will keep the Pound Sterling on its toes. According to the latest exit polls, the Opposition Labor Party is expected to win from the UK Prime Minister Rishi Sunak-led Conservative Party.
- For the BoE rate-cut timeframe, investors expect that the majority of officials will vote for reducing interest rates in the next monetary policy meeting, which will be held on August 1. Policymaker Swati Dhingra and Deputy Governor Dave Ramsden have been supporting rate cuts, and it will be crucial to see which members join them.
- The reason for the high probability of the BoE lowering borrowing rates in August is the return of annual headline inflation to the bankÂ’s target of 2%. However, price pressures in the service sector are still higher than what is required to make rate cuts appropriate.
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 New Zealand Dollar.
| Â | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | Â | 0.00% | -0.08% | 0.10% | 0.08% | 0.21% | 0.27% | 0.02% |
| EUR | -0.00% | Â | -0.09% | 0.09% | 0.08% | 0.20% | 0.26% | 0.02% |
| GBP | 0.08% | 0.09% | Â | 0.14% | 0.14% | 0.29% | 0.34% | 0.09% |
| JPY | -0.10% | -0.09% | -0.14% | Â | -0.03% | 0.11% | 0.16% | -0.06% |
| CAD | -0.08% | -0.08% | -0.14% | 0.03% | Â | 0.11% | 0.18% | -0.08% |
| AUD | -0.21% | -0.20% | -0.29% | -0.11% | -0.11% | Â | 0.06% | -0.19% |
| NZD | -0.27% | -0.26% | -0.34% | -0.16% | -0.18% | -0.06% | Â | -0.26% |
| CHF | -0.02% | -0.02% | -0.09% | 0.06% | 0.08% | 0.19% | 0.26% | Â |
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 holds crucial support of 1.2600
The Pound Sterling holds key support near 1.2600 against the US Dollar. The GBP/USD pair trades inside ThursdayÂ’s trading range as investors prefer to remain sideways ahead of the release of the US inflation data. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590.Â
The pair has dropped 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) oscillates inside the 40.00-60.00 range, indicating a consolidation ahead.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.