GBP/USD marches firmly towards the confluence of the 20/50-DMAs around 1.21.

The GBP/USD snaps three days of losses and approaches the 1.2100 figure as the greenback begins to weaken in the middle of the North American session, courtesy of resurfacing recession fears with US data showing signs of an economic slowdown.

The GBP/USD is trading at 1.2081, after hitting a daily low at 1.2007 during the European session, but bounced back on modest UK employment figures and reclaimed the 1.2050 area.

Data-wise, the US Federal Reservereported that Industrial Production for July rose by 0.6% MoM, underpinned by motor vehicles amid easing supply chain disruptions. Before Wall Street opened, July’s Building House Permits and Housing Starts plummeted, indicating the ongoing deterioration in the housing market, spurred by higher mortgage rates.

Alongside that, Monday’s New York Fed Empire State Manufacturing Index for August dropped to the contractionary territory at -31.1 headline, less than 5 estimated.

The GBP/USD reacted to that, pushing through the 20-day EMA, extending its gains, and hitting a daily high at 1.2117.

On the UK side, employment data was better than estimated, with Claimant Count Change, falling by 10K, better than the 32K estimated, while the Unemployment Rate stood at 3.8%. Even though data shows signs of a robust labor market, the Bank of England is expected to lift rates at their next meeting by 50 bps, regardless of projecting that the UK’s economy might tap into a recession late in the year.

Elsewhere, the political spectrum has not been a driver of the British pound. However, the upcoming election in September might increase volatility in the GBP/USD, and depending on who is elected as Prime Minister; we would likely see the pair’s first Reaction to that.

What to watch

On Wednesday, the UK economic calendar will feature the Retail Price Index and inflation figures in consumer and producer side sources. The US docket will reveal Retail Sales for July, alongside the FOMC’s last meeting minutes and Fed speeches.

AUD/USD trades around 0.7020 ahead of critical Australian data

The AUD/USD pair recovered from an intraday slide below the 0.7000 threshold, but there is no follow through. Australian Westpac Leading Index and Q2 Wage Price Index  coming up next.


EURUSD under pressure trading at around 1.0160

The shared currency is among the weakest dollar’s rivals amid more signs of an economic setback in the Union, exacerbated by the steepening energy crisis. Firmer yields continue to support the dollar.


Gold is losing its shine sub-$1,800

Spot gold remains under selling pressure, trading around $1,775 a troy ounce. The greenback maintained its strong footing throughout the first half of the day as market players remain cautious amid recession concerns.  

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