The Pound Sterling is holding onto its gains against the US Dollar as investors await Federal Reserve Chair Jerome Powell’s testimony. Powell is expected to acknowledge progress on inflation and remain data-dependent for rate cuts, without providing a timeframe. Market speculation for Fed rate cuts starting in September has increased, with expectations rising to 77%. The US CPI data for June will be a major trigger for the US Dollar, with expectations for steady core inflation.
In the UK, investors are focusing on the upcoming GDP and factory data for May. The UK economy is expected to have expanded by 0.2% in May after remaining unchanged in April. Bank of England (BoE) policymaker Jonathan Haskel has argued in favor of keeping interest rates steady due to strong wage growth and inflation in the labor market. However, traders expect the BoE to start reducing interest rates from the August meeting. Political stability following the Labour Party’s majority in UK parliamentary elections has supported the outlook for the Pound Sterling.
From a technical analysis perspective, the Pound Sterling remains above its 20- and 50-day Exponential Moving Averages (EMAs), indicating a bullish trend. The GBP/USD pair has formed an inverted Head and Shoulders chart pattern, with the neckline around 1.2850. A breakout of this pattern could result in a bullish reversal. The 14-day Relative Strength Index (RSI) is in the bullish range, suggesting further upside momentum.
Investors will closely monitor Powell’s testimony for insights into the economy and monetary policy. Powell’s remarks will provide guidance on the Fed’s stance on interest rate cuts and inflation trends. The UK GDP and factory data for May will also be closely watched for signs of economic growth and stability. With market expectations for Fed rate cuts in September on the rise, any surprises in the US CPI data could impact the outlook for the US Dollar. Overall, the Pound Sterling’s strength against the US Dollar hinges on these key economic indicators and monetary policy decisions.
