The Bank of England’s potential reduction of the interest rate due to disappointing UK Retail Sales is playing a role in the devaluation of the Pound Sterling (GBP). The possibility of a weaker currency has given rise to economic uncertainty and increased market volatility. The interest rate decrease is largely expected to occur in August, further pressuring GBP.
In spite of these dynamics, GBP held its key support rate against the US Dollar during Tuesday’s trading session, in anticipation of the release of the July S&P Global PMI data for the US/UK. Depending on its contents, this report could trigger significant market changes.
Meanwhile, the US Dollar’s recovery – spurred by rumours of Donald Trump’s potential re-election – is currently on hold as the market awaits upcoming economic reports.
Interest rate cut’s impact on Pound Sterling
Investors are keenly observing these data to gauge the future strength and stability of the US Dollar.
This week’s investor focus is also on reports like the Q2 GDP, Durable Goods Orders, and the June Personal Consumption Expenditures Price Index, providing insight into the timing of the Federal Reserve’s envisaged interest rate cuts for the year. Investors are also monitoring corporate earnings reports and the Treasury bond yield curve, the outcome of US-China trade talks, and the monthly jobs report.
Despite GBP lagging other counterparts due to BoE’s likely diminution of the prime interest rates, experts hold optimistic views. They speculate that the GBP may regain stability post the BoE August session’s decision.
Financial challenges in the Asia-Pacific region’s currencies are mainly due to their link to China’s economic performance and disappointing Q2 GDP growth. However, the upcoming release of the S&P Global/CIPS PMI data for July may offer some improvement to GBP’s standing with an anticipated growth increase in the manufacturing PMI to 51.1 from a previous 50.9.
