Pound Sterling/dollar consolidates its gains thanks to a weak Dollar pair is trading in a positive range above 1.3203 during the American session, achieving significant gains after stabilizing at strong levels. All eyes are now on the expected monetary policy decisions from the Federal Reserve and Bank of England, which will be issued later this week. These decisions may be crucial in determining the future path of the pair, as investors expect them to contribute to increasing volatility in markets. In this context, the next resistance is at the 1.3200 level, which is an important level that may determine the continuation of the pair’s upward trend.
GBPUSD pair witnessed an increase in its upward momentum on Monday, as it reached its highest level in more than a week. Technical analysis indicates that the upward trend will remain in place in the near term, but traders may take a cautious stance ahead of the monetary policy decisions from the Federal Reserve and the Bank of England. These decisions are expected to significantly impact the pair’s movement in the coming period, prompting investors to hold their positions until the situation becomes clearer. GBPUSD Performance During the Week
The performance of the GBP against major currencies during this week shows clear strength, as GBP was the strongest against the US dollar. This positive performance comes at a time when the US dollar is suffering from noticeable selling pressure. especially after its weakness against its main competitors in the second half of last week.
The weakness of the US dollar supports the rise of the GBPUSD pair
Market expectations indicate the possibility of the Federal Reserve cutting interest rates, which pushed US dollar down significantly. In addition, US Dollar Index (DXY), which measures the performance of the dollar against a basket of major currencies.
GBP against the dollar rise driven by changes in monetary policy
The technical analysis of the GBPUSD pair indicates that the pair is rising at a key support level, driven by changes in monetary policy and global economic developments. The US dollar has seen a decline in its upward momentum recently, as US Treasury yields continue to decline, affecting its appeal as a safe haven. This decline gave the GBPUSD pair an opportunity to rise, as investors took advantage of the weaker dollar to boost their investments in the pound.
With US bond yields falling to their lowest levels for 2024, the appeal of the dollar began to wane, reducing investors’ interest in it. In contrast, the pound’s conditions improved, driven by expectations that the Federal Reserve may adopt a more aggressive monetary policy compared to the Bank of England. This divergence in monetary policy has led the pound to benefit from expectations of a widening interest rate gap between central banks in its favor.
In addition, global financial markets witnessed an improvement in sentiment, which reduced the need to resort to safe assets such as the US dollar. As investors prepare for the possibility of a Fed rate cut, the value of the dollar declined, giving other currencies such as the pound an opportunity to consolidate their gains.
The impact of the Bank of England’s policy on the GBPUSD pair
The Bank of England is expected to adopt a more cautious approach than the Federal Reserve. While the latter is seeking to cut interest rates more aggressively, the Bank of England is likely to continue its policy of raising interest rates at a slower pace. This less aggressive approach has helped support the pound, as it has maintained the interest rate differential between the two currencies.
UK Economic Outlook and Impact on GBP
Economic data from the UK shows a clear divergence in the economic landscape, with the GBP still maintaining a positive outlook, thanks to the Bank of England’s cautious monetary policy. However, some weak economic indicators could dampen this optimism. According to the Office for National Statistics, the UK economy grew by 0.6% during the April-June period, but slower wage growth and stable GDP pose challenges to the outlook for the UK economy.
These factors are raising concerns about the economy’s ability to continue growing at the same pace, and could lead to increased caution among traders, limiting the chances of a GBPUSD rally. Although the Bank of England’s cautious monetary policy is supporting the GBP, these mixed indicators could impact the GBP’s upward trends in financial markets.
On the technical front, the GBPUSD pair is currently trading at $1.31716, up 0.24%, maintaining its bullish tone. The pair is approaching key resistance levels at $1.3209, while it remains supported above its pivot point at $1.3158, suggesting further gains in the coming days.
However, caution is advised as the Relative Strength Index (RSI) remains at 67, indicating that the pair is approaching overbought territory. If the indicator crosses 70, we may see a temporary pullback as traders take profits.
Overall, while expectations of a Fed rate cut and a weaker US dollar support the GBPUSD pair to continue its upward momentum, traders need to follow economic data carefully, as the outlook for the UK economy is not entirely clear. Slowing wage growth and flat GDP in the UK pose challenges that could limit the pound’s ability to make significant gains in the future.
