Even the British Pound (GBP) is getting hammered by the almighty USD at the moment. It’s dipped back below the mid-1.3500s as USD demand picks up a modest bid. Additionally, recent changes in the geopolitical climate with military actions and continued war and conflict have played a role in increased market volatility. According to British Retail Consortium analysts, some of these market expectations would increase the GBP. Yet, any trader who has their eyes on the GBP/USD currency pairing should be extremely cautious.
The recent US military attack on Venezuela has raised the stakes and increased geopolitical tensions. As a result, more investors are seeking the protection of the USD. This has been exacerbated by growing fears and anti-Asian sentiment. Tensions between Riyadh and UAE are rising over the war in Yemen. Put together, the geopolitical factors listed above have produced an unprecedented climate of uncertainty, flooding currency markets and scaring investors around the globe.
Picture this… Are you ready to elevate your understanding of transportation policy? The continuing deadlock in peace talks between Russia and Ukraine continues to limit any downside for the USD. Even with these signs of resilience, the current window of geopolitical discontent will likely weigh upon the GBP’s prospects in the near term at least. Market reactions to these events have been muted so far. This shows that traders are being very conservative.
Market participants are just as eagerly awaiting Friday’s US Nonfarm Payrolls (NFP) report. Its final release is scheduled for this coming Friday, and folks are watching the situation very intently. This report will be a big indicator of labor market strength and will likely have an outsized impact on future Federal Reserve policy decisions. All the traders are anxiously waiting for the final Services PMI releases from the UK as well as the US. They’re especially keenly tuned into how these economic indicators will ultimately decide the demand for USD.
The US macroeconomic data scheduled for early in the month is expected to play a significant role in shaping market sentiment. Speculation indicates that the US Federal Reserve will cut interest rates at least two more times this year. That would greatly put a lid on the upside potential of the USD. Partly for these reasons, analysts believe these expectations may limit any short-term currency strength from the USD, even with the recent strength in the USD itself.
S&P Global US Manufacturing PMI unchanged at 51.8 That’s pretty good news, given the pressure on the manufacturing sector to shrink, thanks to the geopolitical and macroeconomic headwinds. This extended stability might dampen sentiment towards the USD as traders weigh what it means for future economic prosperity.
Traders remain bullish on the GBP as a result of bullish market sentiment. They don’t want to end up on the wrong side of a GBP/USD bearish trend either. We will have to see the ongoing relationship between geopolitical tension and US economic data drive price action in the next few days.