The pound-dollar currency pair will be influenced today by the announcement of the British Services PMI reading, then the most important reaction event since the announcement of the contents of the minutes of the last meeting of the US central bank.

  • For three consecutive trading sessions price GBP/USD the currency pair is trying to bounce back higher but its gains did not exceed the resistance level of 1.2740 and the recovery came after the currency pair collapsed to the support level of 1.2591.
  • The first half of 2023 coincided with a shift in the BoE’s stance from dovish to more assertive in light of persistent inflation.
  • In this regard, Barclays Bank stated that “The Bank of England’s recent sudden 50 basis point increase in the Monetary Policy Committee suggests a more proactive (long overdue) stance towards inflation.”

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Analysis from NatWest Markets suggests some caution as the GBP is only likely to be supported in this higher interest rate environment provided growth remains strong. So a higher interest rate but lower growth environment will not support the valuation of the British currency, which is what analysts at the bank feel in the second half. More recently, polls conducted in June revealed that British consumer confidence continued to improve, with the highly biased GfK figure showing an improvement for the fifth month in a row. Meanwhile, Lloyds Bank’s business barometer revealed business confidence rose to a 14-month high in June.

As for sterling expectations in the coming period, the pound is on track, says Barclays Goldman Sachs, which could outperform in July. It has found some life after a lackluster start to July, and forex analysts say the British currency could continue to benefit from higher UK interest rates this month.

Two-year UK bond yields are proving an attractive proposition for yield-hungry international investors as they remain close to their highest level since 2008 as markets price in higher BoE rates. Sterling was the best-performing major currency in the first half of 2023 as it rose against the entire G10 currency field amid better-than-expected economic performance in the UK and higher Bank of England interest rates.

“We think the pound should outperform as real prices need to rise,” said Michael Cahill, forex analyst at Goldman Sachs.

However, a weekly currency research note from analysts at Barclays Bank maintains a positive outlook for the pound as higher UK interest rates are expected to support global investor demand for British assets.

Based on the performance on the daily chart below, GBP/USD’s attempts to rebound to the upside still lack momentum and a move towards the 1.2840 resistance level could be important for the bulls to get back in control, hence the talk of the 1.3000 psychological resistance level.

At the same time, if the pair pulls back and moves below the 1.2575 support level, the hope of an upward correction will evaporate. The pound-dollar currency pair will be influenced today by the announcement of the British Services PMI reading, then the most important reaction event since the announcement of the contents of the minutes of the last meeting of the US central bank.

GBP/USD

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