Thursday- UK Monetary Policy Report Hearing
Friday- UK GDP m/m
The Pound Sterling to US Dollar exchange rate is currently experiencing a gradual improvement after undergoing its most significant weekly loss in three months. This was a result of the GBPUSD suddenly dropping as a result of stronger-than-expected US employment figures. The tight labor market in the US gives the Federal Reserve more leeway to consider further interest rate increases, which aligns with recent statements made by Fed officials about the potential for continued rate hikes.
In the United Kingdom, there are plans for a cabinet reshuffle, which may lead to political instability and in turn, have a noticeable effect on the Pound’s value.
From a technical perspective, the GBPUSD pair has broken below its bullish trend line after the release of the Non-Farm Payroll data. If bearish momentum persists, whether due to political uncertainty in the UK or a strengthening US Dollar, the pair may test the next support level at around 1.1850.
The markets were left uncertain following the recent release of economic data and a speech by Federal Reserve Chairman Jerome Powell. Powell stated that the easing of inflation has begun, but he expects it to be a gradual process. He also warned that interest rates could rise more than what the market expects if the economic data does not support his expectations.
As a result of stronger employment figures, the US Dollar gained strength against other currencies, including the Pound Sterling and the Japanese Yen. USDJPY, for example, has moved above both its descending channel and the 131 key resistance level. The current short-term rally is sizable, but it remains to be seen if it will be enough to reverse the longer-term bearish trend.
If the US Dollar continues to gain momentum as the market starts to believe in a more hawkish Federal Reserve and a higher terminal rate for the Dollar, the USDJPY pair could test the 134.500 resistance area.
Next week, Japanese Prime Minister Kishida is expected to submit nominees for the top job at the Bank of Japan, which may create some uncertainty for the Yen.
Financial Market Analyst
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