The GBPUSD currency pair was trading up over 23 pips as the Sterling pound edged higher against the US dollar to stem the seven-day decline witnessed against the much stronger US dollar. The move higher was partly fueled by the weaker US Dollar Index (DXY).
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The pound’s strength was not intrinsic, given the weak flash manufacturing and services PMI data from CIPS/IHS Markit yesterday regarding the UK market. The data indicate that both the manufacturing and services industries are suffering.
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Yesterday’s data also put a damper on expectations of future rate hikes from the Bank of England (BoE), which is now expected to hike rates up to levels below 6% instead of crossing this crucial threshold to support the economy and avoid further deterioration in other sectors of the economy.
Still, the BoE may have to keep hiking interest rates if inflation rates in the UK remain high, forcing the central bank to take drastic actions to curtail inflation. The lack of significant releases from the UK docket today left the GBPUSD exposed to external factors from other countries and investor sentiment mostly.
The currency pair’s rally was boosted by hopes of a strong recovery in China, which bodes well for the global economy after the appointment of a new substantive People’s Bank of China (PBoC) Governor earlier today. The move comes as the Chinese government takes steps to shore up the country’s local and export economies.
The GBPUSD pair was also lifted by positive investors sentiment as markets remained predominantly focused on the US markets, where the FOMC started its two-day monetary policy meeting that will culminate in a rate announcement tomorrow.
Many investors also looked forward to the US Conference Board consumer confidence data released in the American session. The CB data came in at 117.0, beating analysts’ estimates of 112.1 and boosting the US dollar slightly.
The currency pair had given up some of its gains at writing due to the upbeat US consumer confidence data. Still, the pound was holding on to its gains, although some analysts regard today’s price action as a much-needed break before the move lower continues.
*This is not investment advice.
The GBPUSD price chart.
The GBPUSD currency pair was trading up 23.8 pips (0.19%) as the Sterling pound edged higher against the US dollar.
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