Key Insights
- GBP/USD steadies above 1.2930, balancing UK economic concerns with US political uncertainty
- Upcoming US economic data and UK PMIs could significantly influence the pair’s direction
- Technical analysis suggests an intact uptrend despite recent pullback from 1.3044 high
GBPUSD Fundamental Anaylsis
The Pound Sterling (GBP) is showing resilience above the 1.2930 level against the US Dollar (USD) as the week begins in London, despite facing some headwinds. The GBP/USD pair has retreated from its recent annual high of 1.3044, with the near-term outlook becoming less certain amid shifting political and economic landscapes.
A key factor influencing currency markets is the growing speculation surrounding Donald Trump’s prospects in the upcoming US presidential elections. President Joe Biden’s decision to endorse Vice President Kamala Harris as the Democratic nominee has fueled expectations of a potential Trump victory. This political shift has lent some support to the US Dollar, with the Dollar Index (DXY) climbing to 104.40 before slightly retracing.
However, the greenback’s gains remain capped by persistent expectations that the Federal Reserve will initiate interest rate cuts as soon as September. This week’s packed economic calendar, featuring preliminary PMIs, Q2 GDP data, Durable Goods Orders, and the PCE Price Index, will be crucial in shaping these expectations.
On the UK front, the Pound is demonstrating strength against most major peers, with the notable exception of the Japanese Yen. This resilience comes despite a sharp contraction in UK Retail Sales for June, which fell by 1.2% against an expected 0.4% decline. This disappointing data has raised questions about the Bank of England’s (BoE) stance at its upcoming August policy meeting.
Adding to the complex picture, while Average Earnings have declined as expected, wage growth remains higher than the BoE’s comfort level for considering rate cuts. Furthermore, UK Finance Minister Rachel Reeves’ hint at potential public sector wage increases could fuel inflation expectations.
Looking ahead, the preliminary S&P Global/CIPS PMI data for July, due on Wednesday, will be a key focus for Sterling traders. Forecasts suggest improvements in both Manufacturing and Composite PMIs, which could provide further support for the Pound if realized.
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GBPUSD Technical Analysis
The GBP/USD pair has found support near 1.2930 after retreating from its fresh annual high. The upward-sloping 20-day Exponential Moving Average (EMA) around 1.2850 suggests that the broader uptrend remains intact, despite the recent pullback.
The 14-day Relative Strength Index (RSI), having retreated from overbought territory, is expected to find support near the 60.00 level. This could signal a potential resumption of the uptrend if broader market conditions remain supportive.
Key levels to watch include the March 8 high near 1.2900 as crucial support, while the two-year high around 1.3140 represents significant resistance. A break above this level could open the door to further gains, while a drop below 1.2900 might signal a deeper correction.
