- As of this writing, the GBP/USD currency pair was trading at $1.2756.
- Last Friday, it attempted to rebound upwards, but its gains did not exceed the resistance level of 1.2773.
- It had recovered previously from significant losses during the same week, reaching a low of 1.2662, its lowest level in over a month.
- Furthermore, the recent attempts at upward rebound have stalled as the US dollar regained some of its recent losses on Thursday following the release of better-than-expected jobs data.
While the range of the US dollar’s rise remained largely limited, the “US dollar” received support from a larger-than-expected decline in the latest initial jobless claims report. According to the results of the economic calendar, the number of Americans filing for unemployment benefits fell to 233,000 for the week ended August 3, missing market expectations of 240,000 and down from an upwardly revised 250,000 the week before. Coming on the heels of last week’s bleak US employment data, signs that the US labor market may be stronger than expected helped keep the US dollar afloat on Thursday afternoon.
Commenting on the US jobs data, Joe Brusuelas, chief economist at RSM US LLP, commented on the X online platform: “A big drop in US initial jobless claims to 233,000. Anything in that range tends to indicate a fairly healthy labor market. Furthermore, non-seasonally adjusted to 203,000. Also, a big drop in Texas to 7,000. This tends to point to doubts that weather played a role in the July jobs report, particularly around those who are not working – whether full-time or part-time – which is justified”
After undergoing significant selling earlier in the week amid fears of a US economic recession that gripped global markets, the US dollar appeared to end the week quietly. However, strong expectations that the Federal Reserve will begin an aggressive monetary tightening cycle next month put additional pressure on US dollar exchange rates, preventing a strong rebound for the greenback.
The Pound Sterling (GBP) Under Pressure Amidst Data Slumps
Conversely, the Pound Sterling (GBP) was largely subdued on Thursday as the UK calendar remained light. In the absence of new UK data, investors remained hesitant to place any aggressive bets on the pound sterling as continued civil unrest continued to dampen sterling sentiment. Right-wing extremist riots across British cities throughout the week have undermined hopes for renewed political stability under a new Labor government, thus deterring investor interest in the pound sterling.
Somewhere else, growing bets on a Bank of England rate cut have added to the pressure on the pound. After fears of a global recession rattled markets earlier in the week, markets are now expecting two more rate cuts by the central bank this year.
Looking ahead, a data-free weekend in both the UK and the US could leave the GBP/USD exchange rate trading sideways. With the lack of data, global risk dynamics could continue to drive movement in the currency pair. Meanwhile, cheerful trading conditions could provide support for the increasingly risk-sensitive pound against its safer rivals. Alternatively, a return to nervous trading could see the US dollar take priority.
Elsewhere, the easing of interest rate cut speculation could weigh on currency movement. As markets continue to price in multiple rate cuts from the Fed and the Bank of England in the coming months, each currency may face additional pressure amid a lack of supportive data.
Technical forecasts for the GBP/USD pair today:
This week, GBP/USD may react heavily to the release of US and UK inflation figures, along with investor sentiment towards risk appetite and the future of global central bank policies. Meanwhile, the overall outlook for GBP/USD is bearish and will strengthen if it moves back towards the support levels of 1.2645 and 1.2580 respectively. On the other hand, the psychological resistance of 1.3000 will remain the most important for the general trend to turn to the upside.
Ready to trade our daily Forex forecast? Here’s some of the best forex broker UK reviews to check out.
