The Pound Sterling has been on the rise lately, gaining strength against the US Dollar. This increase in value can be attributed to the weaker economic data coming out of the United States. As the US Dollar struggles, the Pound Sterling continues to make gains.
One of the major factors contributing to the Pound’s strength is the upcoming UK general elections. The Labour Party is expected to secure a record number of seats in the national election. Polling company Survation has forecasted that Labour Party leader Keir Starmer will become the next prime minister, replacing Rishi Sunak’s Conservatives. This potential change in leadership has bolstered the Pound Sterling.
On the other hand, the US Dollar is facing pressure due to the decline in US Treasury yields. Speculation about the Federal Reserve reducing interest rates in 2024 has added to the challenges faced by the US Dollar. With US markets closed for the Independence Day holiday, the Dollar’s struggles are likely to continue.
In terms of economic data, the recent US ISM Services PMI fell to 48.8 in June, the sharpest decline since April 2020. Additionally, the ADP Employment report showed that US private businesses added 150,000 workers to their payrolls in June, marking the lowest increase in five months. These figures indicate challenges in the US economy, further impacting the strength of the US Dollar.
Looking at the technical analysis of the GBP/USD pair, it is currently trading around 1.2750. While the pair shows a bearish bias within a descending channel on the daily chart, the Relative Strength Index (RSI) suggests that any decline may be mild. The pair could test the upper boundary of the descending channel at 1.2780, with potential to reach June’s high of 1.2860. On the downside, key support lies at the 21-day Exponential Moving Average at 1.2694.
In conclusion, the Pound Sterling’s gains against the US Dollar are driven by a combination of factors, including the upcoming UK general elections, weaker US economic data, and declining US Treasury yields. The future trajectory of both currencies will depend on a variety of economic and political factors, making it essential for investors to stay informed and monitor developments closely.
