The GBP/USD currency pair built on positive traction over the course of the day on Monday, supported by renewed selling pressure around the US Dollar (USD). Spot prices are trading in the vicinity of 1.2930 at the moment. This represents an increase of almost 0.10% for the day. A major support lies around this pair’s 1.2900 round-figure mark, with evidence of resilience in the pair there have seen dip-buyers featuring during the Asian session.
The British Pound (GBP) benefitted from the Bank of England’s (BoE) hawkish trajectory. The BoE has already committed to lowering borrowing costs at a slower pace than other central banks such as the US Federal Reserve (Fed). This policy action has offered sustained upside support to the GBP/USD pair. Bullish traders are particularly summoning the monetary policy divergence between the Fed and BoE as a boon. This optimism has been amplified particularly following a recent breakout above the 200-day Simple Moving Average (SMA).
External factors play a dominant role in dictating the GBP/USD pair. Key member speeches of the Federal Open Market Committee (FOMC) and comments from Bank of England (BoE) Governor Andrew Bailey have a large impact on driving market trends. These developments helped to create a supportive fundamental backdrop, reinforcing prospects for more pairwide upside to come.
The Composite Purchasing Managers Index (PMI) adds to the optimism. It serves as a key forward-looking measure of private sector economic activity in the UK’s manufacturing and services industries. The Chartered Institute of Procurement & Supply and S&P Global jointly publish a monthly PMI index reading. When this reading comes in over 50, it indicates that the UK private economy is growing, which is bullish for the Pound Sterling (GBP). On the other hand, a reading of less than 50 indicates an overall contraction in activity and is considered bearish for the GBP.
The GBP/USD currency pair that just came above the 200-day SMA, creating a tsunami in the market. That breakout is important because it’s the first time this level has been broken since November. This positive technical development has further fanned the flames of bullish hope among traders. Spot LNG prices are currently sitting around their highest peak since November, which they hit last week.
The Bank of Japan (BoJ) and the Fed are on opposite ends of the policy expectation spectrum. Such divergence will be expected to present some short-term trading opportunities with the GBP/USD pair. Traders of all types have been looking to position themselves for the resulting market moves from these key developments.