The GBPUSD is trading choppy around 1.2700 as investors anticipate important Service PMI data following better-than-expected Manufacturing PMI data. The GBPUSD pair is non-directional as the market is often calm owing to the US Independence Day vacation. Investors’ primary emphasis would be on interest rate recommendations from Bank of England (BoE) officials.
Despite the fact that demand from consumers is higher, the economic forecast for the United Kingdom remains positive. The Bank of England raised interest rates. While the Bank of England officials and the UK government are rushing. Inflation appears to be exceedingly stuck at 8.5% and tight monetary policy is failing to achieve the desired results.
The pound sterling holds over 1.2700.
Despite rising interest rates from the Bank of England, the Pound Sterling gains strength. As the United Kingdom’s economic prospects improve.
The S&P Manufacturing PMI for June in the United Kingdom was 46.5, higher than the consensus and the previous report of 46.2.
For the previous 11 months, the Manufacturing PMI has been widely decreasing. A value less than 50.0 indicates a generation shrinkage.
Investors will pay close attention to the June Services PMI report later this week. The economic data is consistent at 53.7. According to Reuters, the Bank of England warned commercial banks on Monday that they may be underestimating their exposure to private equity and commodities markets at a time when increasing interest rates might constrain market liquidity.
The United Kingdom’s inflation is sticky due to a tight labor market and 45-year high food inflation.
According to Citi Bank and polling firm YouGov’s monthly survey, consumer inflation forecasts for the next year jumped to 5.0% in June from 4.7% in May.
This must be the result of tenacious inflation, which is hesitant to leave the 8.5% band. Because of excessive food price inflation and tight labor market circumstances, inflation remains high.
As the UK economy faces more persistent inflation, BoE Governor Andrew Bailey has repeatedly supported more interest rate rises.
In contrast, the BoE Silvana Tenreyro, a policymaker, is opposed to future interest rate rises because it fears having to make a sudden U-turn if it tightens policy further.
The market remains cautious as investors remain on the sidelines ahead of the second-quarter earnings season.
The US Dollar Index (DXY) is under pressure as the US Manufacturing PMI has been falling for eight months in a row.
The US manufacturing activity index came in at 46.0, which was much lower than the predictions of 47.2 and the previous report of 46.9. In contrast to the US PMI data, the New Orders Index increased to 45.6, above the consensus of 44.0 and the previous report of 42.6.
Investors will pay close attention to the Federal Open Market Committee (FOMC) minutes and the employment statistics due out later this week. Automatic Data Processing (ADP) in the United States.
The US ADP private employment report is predicted to show an increase of 180K employees, which is less than the previous increase of 278K.
GBPUSD Technical Outlook
GBPUSD is correcting towards the lower area of the Rising Channel chart pattern, where market players view pullback moves as buying opportunities. The Cable is trading above the 20-period daily Exponential Moving Average (EMA), indicating that the bullish momentum is quite strong.
If Cable falls further below 1.2570, buyers may build positions as a discount buy chance emerges. While the positive bias may vanish if the decline goes below the psychological support of 1.2500.
