GBP/USD moves on an upward trajectory near 1.2270 ahead of UK employment, PMI data
|- GBP/USD extends its gains for the fourth consecutive day ahead of UK economic figures.
- Improved risk sentiment contributes support to underpinning the Pound Sterling.
- UK employment levels are expected to decline in August.
- US Dollar continues to lose ground on the downbeat US Treasury yields.
GBP/USD continues the winning streak that began on Thursday, trading higher near 1.2270 during the Asian session on Tuesday. The pair receives upward support due to the correction in the US Dollar (USD), coupled with improved risk sentiment.
United Kingdom (UK) gears up for the release of Employment and S&P Global PMI data. Economists anticipate a decline in employment levels for the three months leading to August, signaling that companies are scaling back their workforces in response to a gloomy demand outlook.
The downturn in Retail Sales reflects the financial strain on households, driven by high inflation and increased borrowing costs. The substantial decrease in consumer spending is likely to have a notable impact on consumer inflation expectations. Consequently, there is speculation that the Bank of England (BoE) might lean towards maintaining the current interest rates at 5.25% during November's policy meeting, in response to the weakening spending dynamics.
The GBP/USD pair might have encountered obstacles due to geopolitical tensions between Israel and Hamas. However, the improved risk profile is lending support to the Pound Sterling (GBP). Diplomatic initiatives aimed at easing tensions in the Israel-Hamas Gaza Strip have lessened market risk aversion, buoying investors’ risk appetite.
The US Dollar Index (DXY) prolongs its four-day losing streak, potentially influenced by subdued US Treasury yields. The current spot price hovers around 105.40 as of now. The 10-year Treasury yield surged to 5.02%, reaching its highest point since 2007. However, it swiftly reversed course, dropping to 4.85% by the latest update.
Atlanta Federal Reserve President Raphael Bostic expressed doubt regarding a US central bank rate cut before the middle of next year. Fed Philadelphia President Patrick Harker voiced a preference for maintaining existing interest rates, while Fed Cleveland President Loretta Mester suggested that the US central bank is either at or very close to the peak of the rate hike cycle.
Market observers are gearing up for a data-packed week. Tuesday will see scrutiny of the US S&P Global PMI, followed by a close watch on Thursday for Q3 Gross Domestic Product (GDP) figures. The week concludes with a spotlight on the Core Personal Consumption Expenditures (PCE) on Friday.
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