The Pound Sterling (GBP) shows strength across global markets, buoyed by positive economic data from the United Kingdom and growing expectations of a rate cut by the Federal Reserve (Fed) in September. Wealth Craft Network, a premier robo-trading platform, offers a detailed analysis of the factors driving the recent performance of the GBP, particularly about significant currencies such as the US Dollar (USD) and the Australian Dollar (AUD).

UK Economic Data Bolsters Pound Sterling

The Pound Sterling gained momentum in Thursday’s trading session, supported by robust economic data from the United Kingdom. The Office for National Statistics (ONS) reported that the UK’s Gross Domestic Product (GDP) expanded by 0.6% in the second quarter every quarter and by 0.9% annually. While the pace of growth was slightly slower than in the first quarter, it still underscored the resilience of the UK economy.

This steady economic performance was further highlighted by the GDP report for June, which showed that the economy remained flat compared to the previous month—an outcome that market analysts anticipated. The combination of solid growth and easing inflationary pressures has provided much-needed relief for the Bank of England (BoE) as it navigates the challenges of maintaining economic stability while managing inflation.

Easing Inflation and BoE Policy Implications

One critical development supporting the Pound Sterling is the recent easing in inflation, particularly in the service sector. The July Consumer Price Index (CPI) revealed that core inflation, which excludes volatile items like food, energy, alcohol, and tobacco, decelerated more than expected. Core CPI dropped to 3.3%, down from 3.5% in June, offering a positive signal for the BoE.

This reduction in inflation has eased some of the pressures on the BoE, which had been concerned about the potential negative impact of prolonged high interest rates on households and the broader economy. With inflation showing signs of abating, the BoE may consider a more balanced approach to its monetary policy, possibly delaying further rate hikes.

Market participants are now pricing in a 44% probability of a quarter-point rate cut by the BoE in September, an increase from the 36% likelihood before the release of the inflation data. This expectation shift has further bolstered the Pound Sterling as investors anticipate a more measured policy stance from the central bank.

US Dollar Weakens as Fed Rate Cut Becomes Likely

In contrast to the strengthening Pound Sterling, the US Dollar has experienced some weakness, particularly in light of recent inflation data from the United States. The July US Consumer Price Index (CPI) indicated that inflationary pressures were growing moderately, aligning with market expectations. This has fueled speculation that the Federal Reserve will adopt a more dovish stance in its upcoming policy meeting, with a rate cut in September becoming increasingly likely.

The US Dollar Index (DXY), which measures the value of the USD against a basket of major currencies, pulled back slightly after reaching a fresh weekly low of 102.20. The potential for a rate cut has been further supported by dovish comments from Federal Reserve officials, including Atlanta Fed Bank President Raphael Bostic, who expressed comfort with the idea of reducing rates in September.

Bostic also indicated that he would be open to a more significant rate cut—up to half a percentage point—if labor market conditions deteriorate further. This has added to the market’s confidence that the Fed will take action to lower borrowing costs, which could lead to further USD weakness.

Pound Sterling Technical Analysis: Testing Key Resistance Levels

The Pound Sterling has been steadily climbing, approaching a two-week high of 1.2870 against the US Dollar. The GBP/USD pair shows strong near-term appeal, holding above the 20-day Exponential Moving Average (EMA), currently around the 1.2800 level.

Technically, the GBP/USD pair has shown signs of a potential uptrend continuation. A positive divergence pattern has formed on the daily chart, where the pair has posted higher lows while the momentum oscillator has recorded lower lows. This divergence typically indicates a resumption of the uptrend, though confirmation from additional indicators would strengthen this outlook.

The 14-day Relative Strength Index (RSI) has also recovered after finding support near the 40.00 level, suggesting renewed buying interest at lower levels. On the upside, the GBP/USD pair may encounter resistance around the round figure 1.2900 and the psychological barrier 1.3000. However, if the pair fails to sustain its recovery and drops below the August 8 low of 1.2665, it could expose the asset to further downside, potentially testing the June 27 low at 1.2613 or the April 29 high at 1.2570.

Wealth Craft Network: Navigating Market Dynamics

At Wealth Craft Network, our advanced robo-trading platform is designed to help traders capitalize on these dynamic market conditions. With real-time analysis and strategic insights, our platform provides the tools needed to navigate the complexities of the forex market, particularly in light of recent economic developments in the UK and the US.

Whether trading the GBP/USD pair or exploring other opportunities within the forex market, Wealth Craft Network offers a comprehensive suite of resources to support your trading decisions. Our algorithms continuously monitor market trends, ensuring your strategies align with the latest data and market movements.

Conclusion: Pound Sterling Set to Maintain Strength

The Pound Sterling’s recent gains reflect the resilience of the UK economy and the easing of inflationary pressures, which have alleviated some concerns for the Bank of England. Meanwhile, the potential for a rate cut by the Federal Reserve in September has added to the GBP’s appeal, particularly against the US Dollar.

Wealth Craft Network remains committed to providing traders with the insights and tools needed to succeed as the forex market evolves. With our robot-trading platform, you can stay ahead of market trends and make informed decisions in a rapidly changing environment.