Pound Corrects on Dollar Strength, But Losses Stay Capped

Fundamental Analysis

* Pound Resilience: The Pound Sterling slipping against the US Dollar due to a modest recovery in the greenback. However, losses are limited as the outlook for the British currency remains positive, driven by expectations of a less-dovish Bank of England (BoE). Investors anticipate that the BoE will reduce interest rates gradually. In a recent interview with the Kent Messenger newspaper, BoE Governor Andrew Bailey stated, “I do think the path for interest rates will be downwards, gradually.” His remarks indicate confidence in inflation sustainably reaching the bank’s 2% target. When asked about the potential neutral rate, Bailey refrained from specifying a figure but assured that he does not foresee rates returning to the historically low levels observed during the pandemic.

Technical Analysis

* Technical Breakout: GBPUSD was recently traded lower following prior retracement from the resistance level 1.34050. However, MACD which illustrate diminishing bearish momentum signal suggests that the pair may rebound and trade higher from its recent lows.

*Resistance and Support: If the bullish momentum persists, there’s a strong likelihood that the price will potentially head back towards 1.34050. Conversely, a potential reversal is also to be expected and the price could head back towards 1.32500.

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Potential Risks

Looking forward, investors are anticipating the release of the US PCE inflation data for August on Friday, which may provide new insights into the Federal Reserve’s interest rate outlook.

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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.