Pound Sterling gains on firm Fed rate cut prospects, US Inflation in focus

• 
  The
  Pound
  Sterling
  exhibits
  strength
  against
  the
  US
  Dollar
  as
  Fed’s
  Powell
  sees
  softness
  in
  the
  US
  labor
  market
  strength.
• 
  The
  Fed
  chief
  did
  not
  guide
  any
  specific
  rate-cut
  path.
• 
  UK
  GDP
  for
  May
  and
  US
  Inflation
  for
  June
  have
  come
  under
  the
  spotlight.

The
Pound
Sterling
(GBP)
edges
higher
against
the
US
Dollar
(USD)
in
Wednesday’s
American 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.

Daily
Digest
Market
Movers:
Pound
Sterling
remains
firm
with UK
GDP/US
CPI
in
focus

• The
  Pound
  Sterling
  performs
  strongly
  against
  its
  major
  peers
  due
  to
  multiple
  tailwinds.
  The
  British
  currency
  strengthens
  as
  the
  outright
  victory
  of
  the
  United
  Kingdom
  (UK)
  Keir
  Starmer-led
  Labour
  Party
  in
  parliamentary
  elections
  against
  Rishi
  Sunak-led
  Conservative
  Party
  has
  brought
  political
  stability
  to
  the
  economy.
  The
  uncertainty
  over
  the
  Bank
  of
  England
  (BoE)
  rate-cut
  path
  has
  deepened
  after
  hawkish
  guidance
  from
  BoE
  policymaker
  Jonathan
  Haskel.
• On
  Monday,
  Jonathan
  Haskel,
  who
  has
  been
  amongst
  major
  hawks,
  said
  no
  to
  a
  rate
  cut
  in
  August
  as
  inflation
  in
  the
  labor
  market
  is
  still
  higher
  due
  to
  strong
  wage
  growth.
  Haskel
  said,
  “I
  would
  rather
  hold
  rates
  until
  there
  is
  more
  certainty
  that
  underlying
  inflationary
  pressures
  have
  subsided
  sustainably,”
  Reuters
  reported.
• On
  the
  contrary,
  financial
  markets
  currently
  expect
  that
  the
  BoE
  will
  begin
  cutting
  its
  key
  rates
  from
  the
  August
  meeting.
  The
  expectations
  for
  BoE
  rate
  cuts
  in
  August
  have
  been
  prompted
  by
  the
  return
  of
  the
  annual
  headline
  inflation
  to
  bank’s
  target
  of
  2%.
• Meanwhile,
  investors
  shift
  focus
  to
  the
  monthly
  Gross
  Domestic
  Product
  (GDP)
  and
  factory
  data
  for
  May,
  which
  will
  be
  published
  on
  Thursday.
  Economists
  expect
  that
  the
  economy
  expanded
  by
  0.2%
  after
  remaining
  unchanged
  in
  April.
  Industrial
  and
  Manufacturing
  Production
  are
  expected
  to
  have
  grown
  on
  a
  monthly
  and
  annual
  basis
  after
  declining
  in
  April. 

Pound
Sterling
Price
Today:

Technical
Analysis:
Pound
Sterling
clings
to
gains
near
1.2800

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.