The GBP/USD currency pair has dropped below the levels it gained over the last few weeks, rising and approaching the 1.3400 threshold. Aside from this downtick, the market has held steady though, maintaining a firm base above 1.3350. Investors are on edge as they wait for a series of key economic data. On Wednesday, the UK is expected to announce inflation figures that it’s predicted will have a major impact on currency movements.
The recent GBP/USD drop exemplifies the unpredictable nature of the foreign exchange market. After hitting daily tops, the pair has retraced, showing the fickle nature of investor confidence. Analysts observed the stabilization above 1.3350 as a sign of resilience despite a milieu characterized by an aggressive risk aversion.
Investors are always very sensitive to all comments made by central bankers, because they can shed light on future monetary policy. As for monetary policy, the Federal Reserve has been understandably skittish about making easing moves. This hawkish position would, in all likelihood, support the dollar and as a result, weigh on the GBP/USD cross rate. The divergence in policy outlooks between central banks is the key theme for traders to continue to watch.
Beyond purely domestic anxieties, international economic conditions are having a counterbalancing effect on U.S. market dynamics. Much of this economic stuff from China – I think caused in large part by the ongoing economic uncertainty and trade war with U.S. This turn of events has had many worried, not only about Chinese confidence and its impact on global markets.
With investors still wading through uncertainties, gold has reacted with small increases in the beginning of the week. It is continuing to maintain within a very tight trading channel. The risk-averse market environment has underpinned XAU/USD as investors flocked to safe-haven assets during mixed economic data.