Pound Sterling recovers as 30-year UK gilt yields' rally hits pause
- The Pound Sterling recovers against its peers as UK gilts gain ground after a sharp sell-off.
- A sharp increase in long-dated Bond yields has been observed worldwide.
- Investors await key US JOLTS Job Openings data for July.
The Pound Sterling (GBP) finds some relief near an almost four-week low 1.3330 against the US Dollar (US Dollar) during the European trading session on Wednesday. The GBP/USD pair rebounds to near 1.3400 as the US Dollar retreats, following a temporary reversal in the selling momemtum of global bonds.
During European trading hours, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, turns upside down after facing selling pressure near 98.60.
Earlier in the day, safe-haven assets were trading strongly amid a sharp downtrend in long-dated bonds across the globe, reflecting fears among financial market participants about mounting government debt borrowings. Market experts believe that soaring Bond yields suggest that investors expect governments to be unwilling to address piling fiscal deficit issues.
"I think at this stage, there's a lack of confidence in markets that the government is willing to address effectively the scale of the budget deficit and the speed of debt buildup," analysts at National Australia Bank said, Reuters reported.
Market experts also believe that uncertainty surrounding the Autumn Budget is contributing to a significant increase in UK gilt yields. The UK government is likely to announce spending cuts or raise taxes, or both, to offset the impact of welfare spending announced in July.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.18% | -0.13% | 0.13% | 0.11% | -0.16% | 0.05% | -0.14% | |
| EUR | 0.18% | 0.06% | 0.33% | 0.28% | -0.11% | 0.21% | 0.04% | |
| GBP | 0.13% | -0.06% | 0.24% | 0.24% | -0.16% | 0.18% | -0.01% | |
| JPY | -0.13% | -0.33% | -0.24% | -0.02% | -0.38% | -0.17% | -0.25% | |
| CAD | -0.11% | -0.28% | -0.24% | 0.02% | -0.36% | -0.07% | -0.26% | |
| AUD | 0.16% | 0.11% | 0.16% | 0.38% | 0.36% | 0.16% | 0.15% | |
| NZD | -0.05% | -0.21% | -0.18% | 0.17% | 0.07% | -0.16% | -0.19% | |
| CHF | 0.14% | -0.04% | 0.00% | 0.25% | 0.26% | -0.15% | 0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Daily digest market movers: UK Reeves calls fiscal rules as non-negotiable
- The Pound Sterling bounces back against its major peers in Wednesday's European session. The recovery move in the British currency is followed by a pause in rally in United Kingdom (UK) gilts yields . The 30-year UK gilt yields retreat after surging to near 5.75%, the highest level seen since 1998.
- During the European session, the commnets from UK Chancellor of the Exchequer Rachel Reeves that the administration will focus on "bringing inflation and borrowing costs down by keeping a tight grip on day-to-day spending and enforcing fiscal rules", have also provided some relief to the Pound Sterling.
- This week, the major trigger for the GBP/USD pair will be the Nonfarm Payrolls (NFP) data for August, which will be released on Friday. Investors will pay close attention to the US NFP data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
- According to the CME FedWatch tool, there is an almost 92% chance that the Fed will cut interest rates by 25 basis points (bps) in the September policy meeting.
- Lately, Federal Open Market Committee (FOMC) members also supported the need for monetary policy adjustments, citing downside labor market risks.
- In Wednesday’s session, investors will focus on the US JOLTS Job Openings data for July, which will be published at 14:00 GMT. US employers are expected to have posted fresh 7.4 million jobs, almost in line with the prior reading of 7.44 million.
- On the political front, a US appeals court has ruled against President Donald Trump’s tariffs, citing a majority of them as “illegal” and accusing Trump of wrongfully invoking the emergency law. Meanwhile, Trump has announced that he will move to the Supreme Court to keep tariffs in place.
- On Tuesday, the US ISM reported that the Manufacturing Purchasing Managers’ Index (PMI) contracted for the sixth time in a row. The Manufacturing PMI came in higher at 48.7 from 48.0 in July, but missed estimates of 49.0. A figure below the 50.0 threshold is considered a contraction in business activity.
Technical Analysis: Pound Sterling remains below 20-day EMA
The Pound Sterling recovers after discoverig bying interest near 1.3330 against the US Dollar on Wednesday. However, the near-term trend of the GBP/USD pair has remained bearish as it stays below the 20-day Exponential Moving Average (EMA), which trades around 1.3463.
The 14-day Relative Strength Index (RSI) slides to near 40.00. A fresh bearish momentum would emerge if the RSI breaks below the this level.
Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the August 14 high near 1.3600 will act as a key barrier.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
