GBP/USD Struggles On BoE Rate Cut Bets, Civil Unrest

Fundamental Analysis

* Cable Struggle: The pound sterling continues to experience downward pressure as markets speculate about the possibility of two additional interest rate cuts from the Bank of England (BoE) this year. Recently, the BoE reduced interest rates for the first time since March 2020, lowering the bank rate by 0.25 percentage points to 5%. BoE Governor Andrew Bailey emphasized that rate decisions would be made on a meeting-by-meeting basis, but investors are anticipating another rate cut this year, with a 55% probability for a move at the September meeting. Meanwhile, ongoing riots in the UK are negatively impacting interest in the pound by casting doubt on the country’s return to political stability.

Technical Analysis

* Technical Breakout: GBPUSD was traded lower while currently testing the support level 1.26800. MACD which illustrate bearish momentum signal with the formation of death cross suggest the pair to potentially extend its losses.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 1.25700 after it breaks below the support level 1.26800. Conversely, a potential reversal is also to be expected and the price could head back towards 1.27950.

Understand how technical analysis can help you in this trading opportunity.

Potential Risks

* With no significant UK data releases this week, cable traders are turning their attention to next week’s UK labor market figures and the update on the US Producer Price Index (PPI) inflation. Upcoming UK and US Consumer Price Index (CPI) inflation data, along with UK Gross Domestic Product (GDP) growth and US Retail Sales, are also on the agenda. Additionally, the market will continue to monitor the situation with ongoing unrest in the UK.

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Monitoring

Stay updated on US and UK data, central bank updates and any shifts in the US Dollar’s strength by following PU Prime’s market insights and daily financial news.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.