Pound Sterling corrects marginally as investors await inflation report for further action – Crypto News – Crypto News
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GBP/USD finds some support near mid-1.1400s, eyes BoE for fresh impetus GBP/USD finds some support near mid-1.1400s, eyes BoE for fresh impetus

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Pound Sterling corrects marginally as investors await inflation report for further action – Crypto News

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  • Pound Sterling has slipped modestly as investors await key inflation data for a fresh trigger.
  • The United Kingdom’s inflation is set to remain sticky as labor shortages are still a major issue.
  • Food price inflation is expected to decelerate to 9% by December.

Pound Sterling has sensed light profit booking after printing a fresh annual high at 1.3140. The GBP/USD pair will likely resume its north-side rally amid an absence of evidence that the United Kingdom’s inflation will cool down. To return inflation to 2%, the Bank of England (BoE) has already raised interest rates to 5% and further policy-tightening is in the pipeline.

United Kingdom’s labor market data missed estimates this week But wage pressures remained elevated as firms are offering higher salaries to bring fresh talent in-house considering labor shortages. No doubt, higher disposable income equipped with households would propel inflationary pressures, which would threaten the economic Outlook, Investors will keep an eye on next week’s inflation data as a stubborn report could trigger fears of recession.

Daily Digest Market Movers: Pound Sterling senses pressure as risk appetite eases

  • The Pound Sterling has dropped to near 1.3100 as the US Dollar Index (DXY) has attempted a recovery move after a five-day losing streak.
  • After United Kingdom’s weak labor market report, rising wage pressures, and bleak factory activities, investors need guidance on interest rates peak from the Bank of England.
  • UK’s employment data has demonstrated the burden of higher interest rates by the BoE this week despite the labor cost index maintaining strength.
  • After the labor market and factory activity report, investors are shifting their focus towards the Consumer Price Index (CPI) data, which will release next week on Wednesday at 06:00 GMT.
  • Investors should note that in May annual headline inflation rebounded to 8.7% and core CPI that excludes volatile oil and food prices printed a fresh high of 7.1%.
  • Price pressures in the UK economy have not shown any evidence of softening despite BoE Governor Andrew Bailey having raised interest rates to 5%.
  • Catalysts that have propelled severe inflation in the UK economy are labor shortages and significantly higher food inflation.
  • Brexit event and early retirements by UK individuals are responsible for extreme labor shortages.
  • Food price inflation in the UK economy dropped to 18.3% in May from its 45-year high of 19.1 and has not peaked yet.
  • The UK’s Institute of Grocery Distribution has forecast that food inflation will decelerate in the second half of the year and could drop to 9% by December.
  • Re-hot inflation is threatening the UK’s economic outlook and May’s Gross Domestic Product (GDP) contracted at a slower pace of 0.1% against the consensus of -0.3%.
  • The burden on the UK economy could elevate as the BOE is set to raise interest rates further. Money markets are expecting that interest rates would peak around 6.5%.
  • Overall market mood is upbeat as inflation in the United States has softened significantly, however, short-term uncertainty ahead of corporate earnings cannot be ruled out.
  • America’s soft CPI and Producer Price Index (PPI) report for June month has elevated hopes of only one more interest rate hike from the Federal Reserve (Fed).
  • The US economy is clearly in a disinflation process but has failed to turn Fed policymakers dovish.
  • Fed Governor Christopher Waller is still confident that two more interest rate hikes are appropriate this year to bring down inflation to 2%.

Technical Analysis: Pound Sterling delivers a Rising Channel breakout

Pound Sterling looks set to register the biggest weekly gains in the past eight months amid a cheerful market mood and expectations of more interest rate hikes by the Bank of England. The Cable has delivered a breakout of the Rising Channel chart pattern formed on a daily scale. A breakout of the aforementioned charts The pattern indicates that the upside bias for the Pound Sterling is full of strength. Momentum oscillators are in a bullish trajectory, supporting more gains 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.

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