During European trading hours on Wednesday, the GBP/USD currency pair remained above the 1.3400 level. This movement at least demonstrates a cautious bullish sentiment in the market. Traders were focused on the exchange rate. A key area to watch was reaction to key U.S. economic data that had the potential to move the pair heavily in one direction.
The British pound continued to lag behind as it failed to recoup its losses against the greenback. Analysts said that GBP/USD has little upside to be had. They pointed out that this falls right before key US economic indicators, including jobs data, GDP numbers and PCE inflation releases. Here’s what to watch for in the upcoming releases to understand the state of the US economy. Or, they might result in changes in the stance of monetary policy.
And of course, investors are most eagerly awaiting the release of the US jobs data, due out later this week. This data is likely to readjust market expectations about the timing and size of future Fed moves on rates. Any upside surprise in the jobs report would likely strengthen the dollar, adding further downward pressure to GBP/USD.
Along with labor stats, market participants are highly focused on US GDP figures. This metric is key in determining economic growth, and its release risked adding even more volatility to currency markets. If these GDP figures are stronger than expected, that could add to the pound’s growing list of woes.
In addition, the PCE (Personal Consumption Expenditures) inflation data will be equally critical for traders. As a key indicator of inflation trends in the US, any surprises in this report could influence investor sentiment and potentially alter the trajectory of GBP/USD.
Tellingly, in the face of these soon-to-be-announced deals, market sentiment is widely cautious. Traders have grown increasingly concerned about the economic outlook. Consequently, many are going with a wait-and-see stance, suppressing short positions in GBP/USD.