The GBPUSD currency pair was trading flat the day after alternating between gains and losses for most of the day. The indecision witnessed in the currency markets was primarily driven by the lack of significant news releases from most dockets today.
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Most currency pairs, including the GBPUSD, lost momentum as traders remained undecided on whether to buy or sell the currency pairs. Investors were still determining what to do with the Sterling pound as future rate hikes from the Bank of England remain highly likely.
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Current estimates indicate that UK inflation will likely remain above the central bank’s 2% target for the next four years, and as such, the BoE will be forced to continue hiking rates if it wants to slow down stubbornly high inflation. However, further rate hikes will likely plunge the UK economy into a recession.
This week, investors will monitor the UK manufacturing sector data for June, with the performance of British factories under review and the preliminary GDP data for the April-June quarter. The two reports will be crucial to gauging whether there is room for the BoE to keep hiking interest rates.
Meanwhile, data from the BoE Pill and the National Institute of Economic & Social Research (NIESR) indicate that UK PM Rishi Sunak can fulfil his promise of reducing UK inflation to 5% by the end of 2023.
The UK’s inflation data is expected to remain elevated due to labour shortages as individuals choose early retirement. Lack of availability to fill higher vacancies would stabilise the wage growth pace.
NIESR forecasts also indicate that UK wage growth will hold at 6% next year and this year.
Denys Peleshok, Head of Asia at CPT Markets, said: “In the meantime, traders continue to monitor economic data in order to anticipate potential changes in monetary policy. In this regard, US inflation data could remain the center of attention later this week and could generate a significant amount of volatility, impacting all major currency pairs. While the British pound stabilized to a certain extent against the dollar, it could remain exposed to the downside with the USD strengthening to a certain extent and traders awaiting UK GDP figures at the end of the week.”
The GBPUSD price chart.
The GBPUSD currency pair traded flat today after alternating between gains and losses.
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