The
Pound
Sterling
(GBP)
edges
higher
against
the
US
Dollar
(USD)
in
Wednesday’s
early
London
session
after
a
mild
correction
from
almost
a
four-week
high
of
1.2850
this
week.
The
broader
appeal
of
the
GBP/USD
pair
remains
firm
amid
strong
speculation
that
the
Federal
Reserve
(Fed)
will
start
reducing
interest
rates
during
the
September
meeting.
The
odds
for
the
Fed
pivoting
to
policy
normalization
remain
firm
even
though
Fed
Chair
Jerome
Powell
reiterated
in
his
semi-annual
Congressional
testimony
on
Tuesday,
refrained
from
providing
any
specific
rate-cut
path
for
this
year.
Powell
argued
in
favor
of
maintaining
interest
rates
at
their
current
levels
for
long
until
they
get
evidence
that
inflation
will
return
to
the
desired
rate
of
2%.
What
was
unexpected
from
Fed
Powell’s
commentary
before
Congress
is
his
acknowledgement
that
the
United
States
(US)
economy
is
no
longer
overheated,
with
cooling
job
market
conditions.
Powell
said
that
the
labor
market
has
moderated
to
where
it
was
before
pandemic-era.
Now
that
risks
have
become
two-sided,
a
rate-cut
move
by
the
Fed
in
September
appears
to
be
a
done
deal.
For
more
clarity,
investors
will
focus
on
the
US
Consumer
Price
Index
(CPI)
report
for
June,
which
will
be
published
on
Thursday.
The
report
is
expected
to
show
that
the
core
inflation,
which
strips
off
volatile
food
and
energy
items,
grew
steadily
by
0.2%
and
3.4%
on
a
monthly
and
annual
basis,
respectively.
Annual
headline
inflation
is
estimated
to
have
decelerated
to
3.1%
from
May’s
reading
of
3.3%,
while
the
monthly
figure
is
expected
to
have
barely
grown
after
remaining
unchanged.
A
scenario
in
which
price
pressures
remain
sticky
or
hot
would
ease
expectations
for
rate
cuts
in
September.
On
the
contrary,
soft
numbers
will
boost
them.
The
Pound
Sterling
aims
to
hold
the
key
figure
of
1.2800
against
the
US
Dollar.
The
GBP/USD
pair
gathers
strength
for
a
decisive
breakout
of
the
Inverted
Head
and
Shoulder
(H&S)
chart
formation
on
a
daily
timeframe
whose
neckline
is
plotted
near
1.2850.
A
breakout
of
the
H&S
formation
results
in
a
bullish
reversal.
Advancing
20-day
Exponential
Moving
Average
(EMA)
near
1.2730,
suggests
that
the
near-term
trend
is
bullish.
The
14-day
Relative
Strength
Index
(RSI)
climbs
into
the
bullish
range
of
60.00-80.00.
A
sustained
move
above
the
same
will
keep
the
momentum
towards
the
upside.
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.
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