The Pound Sterling traded mixed early in the week. This was largely explained by the powerful rebound of the US Dollar. Pound Sterling During the European trading session on Monday, GBP/USD was down 0.4%, trading around 1.3420. The quint of USDCAD is Non-Stop going for to reclaim its power above the 20-day Exponential Moving Average (EMA). This EMA is quite near the 1.3476 area.
As participants in the market digest the view of the economy, the GBP/USD pair continues to be stuck in Friday’s range, swinging back and forth around the 1.3440 mark. As evidenced by recent performance, there’s a wall of selling pressure. This increase is led by a significant jump on the US Dollar Index (DXY), which went up 0.55% to almost 98.25. This development is doubly noteworthy, as it heralds the deeper currents of market forces that are threatening the price of the Pound Sterling.
As a result, the 14-day Relative Strength Index (RSI) for GBP/USD has been oscillating between 40.00 and 60.00. This gyration represents cause for concern at best, going nowhere fast with no real positive momentum in either direction. According to analysts, this initial 1.3140 low from August 1 is an important support area for GBP/USD. They further label the September 17 high of 1.3726 as an important ceiling that any potential advance needs to surpass.
Recent economic data have increased the conflicting uncertainty about how well the Pound Sterling will do. The UK’s Services Purchasing Managers’ Index (PMI) came in at 50.8. This reading was well below the advance estimate of 51.9 and down sharply from the 54.2 reading in August. This sharp decline is a bad omen for the services sector, adding to the headwinds facing GBP/USD – as mentioned above.
U.S. political rhetoric has affected market sentiment. Democratic Senator Ruben Gallego expressed concern over the direction of a continuing resolution. When pressed on whether legislators were near an agreement, he answered, “We’re not at that point, no.” These kinds of sentiments can produce whipsaw reactions in forex markets, especially for GBP/USD.
All eyes among UK investors are now firmly on what Bank of England (BoE) Governor Andrew Bailey will say, with appearances from the Bank Governor coming later this week. His remarks will no doubt provide important perspective. They could provide major clues as to whether the UK central bank is set to move on interest rate cuts before 2023 is over. At their most recent policy meeting in August, the BoE had forecast inflation to peak at around 4% in September. This forecast led to renewed market speculation about possible changes to future monetary policy.
Today’s trading picture serves as a great example of how those domestic and international pressures can drive the direction of GBP/USD valuations. Traders worried as they see the -0.16% fluctuation in GBP. In one other session, they saw the opposite bright-side 0.49% increase further igniting their efforts to find clues that could affect market sentiment.