The GBPUSD currency pair was trading down over 40 pips as the US dollar rallied against the Sterling pound, which fell after the Bank of England (BoE) Chief Economist Huw Pill delivered a hawkish commentary regarding future rate hikes from the central bank.
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The BoE’s Chief Economist noted that monetary policy must be sufficiently restrictive for long enough, which indicates that the central bank could continue hiking interest rates despite the looming risk of a significant recession in the UK due to the high interest rates.
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The lack of news releases from the UK docket meant that the Sterling pound was left at the mercy of the US dollar and investor sentiment. The positive investor sentiment towards the US dollar saw it rally against the Sterling pound, pushing the GBPUSD currency pair lower.
The release of the upbeat US initial jobless claims data in the early American session also hurt the pair as the US recorded 228,000 new jobless claims, beating analysts' expectations of 236,000 new claims and the previous figure of 232,000 claims.
The US Core Personal Consumption Expenditure (PCE) report, released simultaneously with the jobless claims, also boosted the US dollar as the print was recorded at 0.2%, meeting analysts’ consensus estimates.
However, investor attention remains focussed on tomorrow's US non-farm payrolls (NFP), which many expect will set the tone for the Fed’s decision on whether to hike rates at its September meeting or leave rates stable for a while as they monitor the job market and inflation.
An upbeat non-farm payroll report could boost the US dollar by giving the Fed room for one more rate hike before pausing its rate hiking cycle.
UOB Group’s Economist, Lee Sue Ann and Markets Strategist Quek Ser Leang said: “24-hour view: Yesterday, when GBP was trading at 1.2635, we highlighted that “as long as GBP does not break below 1.2580, it could rise further. However, we were of the view that “there does not appear to be enough momentum for GBP to break the major resistance at 1.2685.” While GBP strengthened as expected, the advance exceeded our expectations considerably. GBP soared to a high of 1.2746 before closing higher by 0.59% (NY close of 1.2719), its biggest 1-day gain in more than a month.”
The GBPUSD price chart.
The GBPUSD currency pair was trading down 41.3 pips (0.32%) as the US dollar rallied against the Sterling pound.
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