- GBP/USD remains on the sidelines after rising the most in a fortnight as well as three consecutive quarters.
- Britain’s health secretary is following fresh talks with doctors amid a looming health crisis about a planned health workers’ strike in July.
- UK economic recession fears intensify after lackluster UK data, but BoE hawks defend Cable buyers.
- Sterling has fewer dates at home, the US calendar can entertain traders.
GBP/USD is flirting with the 1.2700 round as bulls look for further clues to defend the previous day’s gains amid a slow start to a key week. That said, the Cable pair’s recent inactivity could be related to mixed headlines on employment and growth conditions in the UK, as well as the lack of a clear market reaction to news of US-China talks.
The UK Times has come out with a report indicating that British Health Secretary Steve Barclay is willing to increase doctors’ pay and has called for an end to consultant strikes so that negotiations can resume. “Barclay’s admission came as the head of the NHS (National Health Services) warned that disruptions to routine health care would become ‘more significant’ this month,” the reports said. It should be noted that the UK employment report looked mixed and signaled an easing of the labor crisis.
Elsewhere, a senior US Treasury official as well as China’s Ministry of Finance both recently confirmed US Treasury Secretary Janet Yellen’s visit to China during July 06-09. While the news appears positive for sentiment on the front line, the details appear less impressive as US Treasury Secretary Yellen is likely to raise concerns over human rights abuses against the Uyghur Muslim minority, China’s recent move to ban the sale of Micron Technology memory chips and China’s moves against foreign due diligence and consulting firms according to Reuters.
It should be noted that Friday’s softer US inflation tracks triggered risk-on sentiment and supported the GBP/USD pair’s rally. And so it is Cable the pair has fallen for the past two weeks in a row on fears of a UK recession. This means UK GDP in the first quarter (Q1) of 2023 is in line with forecasts of 0.1% quarter-on-quarter and 0.2% year-on-year in the latest figures.
On Friday, the Federal Reserve’s (Fed) preferred inflation gauge, namely the US personal consumption expenditure (PCE) price index, sparked hawkish expectations from the US central bank with its smallest annual gain in six months. The same was added to the absence of any major hawkish comments from US central bank officials, following a flurry of Fed statements early last week, in favor of GBP/USD bulls.
In this context, S&P500 futures are grinding higher thanks to a positive performance on Wall Street, while US Treasury yields remain firmer.
Moving on, final UK S&P Global/CIPS Manufacturing figures PMI for June will be preceded by the US ISM Manufacturing PMI for that month to drive the intraday movements of the GBP/USD pair. However, the main focus this week will be on the minutes of the Federal Open Market Committee (FOMC) monetary policy meeting and the US employment report.
Technical analysis
Convergence of the 14-day descending resistance line and 10-DMA is prompting GBP/USD bulls around 1.2710.