GBP/USD stalls at a key area of daily confluence-resistance.GBP/USD is down on the day but reviving. At 1.1717, the pound is making its way from the lows of the day which has been 1.1648, travelling to 1.1743 at the star of new York. Markets in the UK being closed for Summer Bank Holiday have left volumes thin but the US dollar has been pressured supporting its rivals thus far.
Currently, stocks on Wall Street are showing their fragility to last week’s speech from the Federal Reserve’s chairman Jerome Powell which dominates the start of the weeks business leaving US data as the key focus. Markets are focused on the end of the week, when the ISM’s national manufacturing reading for August will be released on Thursday followed by the all important monthly employment report on Friday ahead of the long holiday weekend. Additionally, there will be various Fed speakers this week and traders will be tentative to complimentary rhetoric to Powell’s hawkish message.
For US obs, analysts at TD Securities expect employment to advance robustly in August but at a more moderate pace following the booming 528k print registered in July. ”High-frequency data, including Homebase, point to still above-trend job creation. We also look for the UE rate to drop by a tenth for a second consecutive month to 3.4%, and for wage growth to advance at a firm 0.4% MoM (5.3% YoY).”
Domestically, analysts at TD Securities expect the Bank of England’s price stability mandate will force them to continue to hike even with a recessionary path forecasted by the BoE for 2023. This follows the recent double-digit UK Consumer Price Index print that confirmed the rates market’s bias, supporting cable even in the face of a dollar in demand.
Looking ahead, the analysts at TD Securities expect the Monetary Policy Committe to hike by 50bps at both its September and November meetings, and by 25bps in December, before an 8-month pause. ”From August 2023, we expect a series of cuts, returning Bank Rate to its neutral rate of around 1.75% in 2024.”
GBP/USD technical analysis
Cable is in a forceful downtrend, as per the weekly chart above, and there is plenty of momentum. That being said, in due course, the M-formation will be a pull to the upside, perhaps as a nearterm temporary pause in the trend.
The daily outlook is pointing to a move lower, as per the 38.2% ratio aligning with prior lows. This appears to be bearish for the near term sessions.
EUR/USD steadies near parity, looks to post daily gains
EUR/USD has lost its bullish momentum and retreated from session highs during the American session before steadying near parity. The risk-averse market environment is helping the dollar stay resilient and doesn’t allow the pair to gather further bullish momentum.
GBP/USD stays in negative territory at around 1.1700
GBP/USD has turned south and declined to the 1.1700 area after having recovered above 1.1740 earlier in the session. The negative shift witnessed in risk sentiment in the second half of the day helps the greenback find demand and limits the pair’s upside.
Gold: Lower lows hint at more pain for the bright metal
Following an early dip, spot gold is marginally higher for the day. The dollar surged at the weekly opening as investors continued to price in Powell’s words on Friday.