This week has seen a significant rise in the GBP/USD Forex pair, spurred by strong UK GDP figures and weaker US inflation data. This has resulted in a three-day upward trend for the sterling against the dollar, bolstered by robust economic indicators from the UK and tempered inflation indexes in the US.
The British pound has emerged as the best-performing currency among developed economies following the victory of the Labour Party in the UK’s General Election. The pound’s ascent was further reinforced when Bank of England’s Chief Economist, Huw Pill, advised a circumspect approach to future rate cuts considering the UK’s continued high core inflation rate.
The GBP/USD pair’s consistent growth this week is credited to the UK’s impressive GDP numbers. According to UK’s Office of National Statistics, the British economy grew by 0.4% in May, surpassing the anticipated 0.1% growth. The market and investors greeted this with favorable surprise, driving up the demand for the British pound.
Investors and the currency market closely follow the UK’s financial state, as it’s a significant factor influencing the GBP/USD pair. Growth signs will likely keep the pair bullish in the short-to-mid-term. Long-term prospects largely hinge on the UK’s strategy to sustain economic recovery.
GBP/USD rises due to UK’s robust economy
With the US Federal Reserve’s meeting minutes set to be released soon, further fluctuations in the GBP/USD pair may be incited.
Next, the market will turn its attention to the UK inflation data expected on Wednesday. Predictions suggest a minor drop in the headline Consumer Price Index for June from 2.0% in May to 1.9%. If accurate, the Bank of England could reconsider an interest rate cut in their August meeting.
Federal Reserve Chairman Jerome Powell is expected to provide a statement on Monday regarding the positive US inflation data. Powell’s insights could offer perspective on the current inflation trends, potentially influencing global investment decisions and shaping future interest rate trajectories.
Technical analysis shows a strong bullish trend for the GBP/USD pair in recent weeks. Essential indicators suggest continued buying, aiming for a third resistance at 1.3030. On the other hand, traders should remain conscious of abrupt plunges, which could signify a bearish trend reversal. Nevertheless, as long as the pair maintains its gains above the 50-day moving average, the bullish sentiment should persist.
