GBP/USD has been torn between higher inflation and central bank dismissal – on both sides of the pond. According to FXStreet’s Analyst Yohay Elam, sterling may suffer while the Ban of England (BoE) looks the other way.
Inflation and covid remain the central themes
“Federal Reserve Chair Jerome Powell said the US economy is still ‘a ways off’ to a level that warrants tapering down the bank's bond-buying scheme. Moreover, Powell insisted that rising prices are reopening-related, and thus temporary – even as he acknowledged they could persist for a few months.”
“The picture is similar in the UK, albeit with more modest inflation. Consumers had to pay 2.5% more than last year for the same basket of goods in June. Nevertheless, Bank of England Governor Andrew Bailey clarified he will not be forced to raise rates due to such transitory inflation. This takes the wind out of the sterling's sails.”
“Another factor that could pound the pound comes from the rapid spread of the Delta covid variant, just as the ‘big bang’ reopening is set to occur on July 19. The government seems keen on abandoning almost all limits, even as Brits are hesitant about maskless people in public transport.”
“Delta is also spreading in the US, and it could cause the Fed a further pause – but if the US significantly slows down, it could benefit the safe-haven dollar.”
“Support awaits at 1.38, which is the weekly low. It is followed by 1.3750 and then by 1.3730. Resistance is at 1.3865, the daily high, and then 1.3905, a stubborn cape from last week.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.