Sterling traded near 1.3300 in the New York morning and was effectively flat, after a session of about 30 pips between a little above 1.3250 and fractionally over 1.3300, the tightest daily range in weeks, just ahead of a Federal Reserve decision and a Bank of England meeting with a new Monetary Policy Report. Price remains below both the 50-day and 200-day EMA, which have converged just under 1.3400, while the pound is down roughly two and a half cents from its mid-July peak near 1.3550 and has slipped beneath a 1.3300 area it previously held for three weeks.<\/p>\n
The dollar drove the tone, with the Dollar Index near 101.50 at a one-month high and USD\/JPY just short of 164.00, as a risk-off move hit Asian equities, with Korean shares down almost 11% and the Nikkei 225 close to 4% lower. Fed funds futures put the odds of a hike at about 36%, unchanged since mid-last week despite a stand-down in the Gulf and a 7% fall in crude, while at least one increase by September is around 80% priced; softer US data showed a four-week private hiring average of 15K versus 16.25K, and consumer confidence at 90.8 versus expectations near 92, as the BOE backdrop included June retail sales up 1%, inflation at 2.6% YoY with services at 3.6%, and a expected 7-2 hold with two members preferring 4.00%. Events cluster at 18:00 GMT and 18:30 GMT on Wednesday for the Fed, then 11:00 GMT and 11:30 GMT on Thursday for the BOE, alongside US releases including core PCE at 0.2% MoM and 3.3% YoY, GDP at 2.1% annualised, jobless claims at 200K versus 187K, and on Friday the employment cost index at 0.8% plus final July sentiment; technical markers cite resistance at 1.3300 and just under 1.3400, with support at 1.3250, then 1.3200 and just under 1.3150.<\/p>\n
We advise derivative traders to position for a continuing decline in the British Pound relative to the US Dollar over the coming weeks. The currency’s inability to break above the 1.3300 level, despite positive domestic economic data, indicates a strong underlying bearish sentiment. We should look to sell GBP\/USD on any short-term rallies toward 1.3300, targeting support levels at 1.3250 and 1.3200.<\/p>\n
The dominant force in this exchange rate is the strength of the US Dollar, which remains highly resilient even in the face of softer domestic data. Historically, during periods of global market volatility, the Dollar acts as a primary safe haven, as seen when major Asian stock indices faced sharp sell-offs. Recent data shows the U.S. Dollar Index (DXY) maintaining its strength near the 101.50 mark, bolstered by expectations that the Federal Reserve will maintain high interest rates. <\/p>\n
Furthermore, technical indicators heavily favor a downward trend for the Pound. Both the 50-day and 200-day Exponential Moving Averages have converged just below 1.3400, acting as a formidable ceiling that caps any upward momentum. As long as the pair remains below this critical threshold, we recommend maintaining a bearish bias and utilizing options or futures to hedge against further downside.<\/p>\n\n\n\n