The Pound Sterling is showing strength against the US Dollar as expectations for Federal Reserve rate cuts in September have increased. This positive momentum is attributed to Keir Starmer’s significant win in the UK parliamentary elections, which has brought political stability to the country.
Investors are closely monitoring key economic indicators this week, including the UK monthly Gross Domestic Product (GDP) and US Consumer Price Index (CPI) data for June. The UK economy is expected to have expanded by 0.2% in May, while economists predict a steady growth of 3.4% in the annual core CPI for the US.
The recent US Nonfarm Payrolls (NFP) report for June indicated moderating labor market conditions, leading to expectations of early rate cuts by the Federal Reserve. The unexpected weakness in job creation and wage growth has raised concerns, prompting investors to anticipate a 75.8% probability of rate cuts in September, according to the CME FedWatch tool.
From a technical analysis perspective, the Pound Sterling is trading near a three-week high against the US Dollar, indicating a bullish outlook. The GBP/USD pair has surpassed key Fibonacci retracement levels and moving averages, suggesting further upward momentum.
The Unemployment Rate in the US, released by the Bureau of Labor Statistics, plays a crucial role in shaping market sentiment. A decrease in the Unemployment Rate is generally seen as positive for the US Dollar, while an increase is viewed as negative. The latest rate of 4.1% has implications for the currency’s performance in the coming months.
Overall, the current economic landscape is marked by uncertainty surrounding central bank policies and global economic conditions. Investors are advised to conduct thorough research and exercise caution when making investment decisions in these volatile markets. It is essential to stay informed about key economic indicators and geopolitical events that could impact currency movements and financial markets.