Market Analysis

Pound Sterling Weakens Ahead of U.S. Q2 Flash GDP Report

Amos Simanungkalit · 25 Jul12K Views

The Pound Sterling (GBP) has weakened to 1.2880 against the US Dollar (USD) during Thursday’s London session. The decline in the GBP/USD pair is attributed to negative market sentiment ahead of the US Q2 Gross Domestic Product (GDP) data release, scheduled for 12:30 GMT.

In European trading hours, S&P 500 futures showed some gains, though this seems to be a modest rebound following a sharp 2.31% drop on Wednesday. Meanwhile, the US Dollar Index (DXY), which measures the Greenback's performance against six major currencies, is showing sluggishness at approximately 104.30.

The US Q2 GDP is projected to have increased by 2% from the previous figure of 1.4% on an annualized basis. This expected growth is largely due to strong consumer spending. The advanced GDP Price Index is anticipated to have slowed to 2.6% from the previous 3.1%, which would provide some relief to Federal Reserve (Fed) policymakers and strengthen expectations for interest rate cuts in September.

Looking ahead, the key focus for the US Dollar will be the June Personal Consumption Expenditures (PCE) Price Index data, set for release on Friday. The core PCE inflation, the Fed’s preferred measure of inflation, is estimated to have eased to 2.5% from 2.6% in May, with the monthly increase projected to be a steady 0.1%.

Technical Analysis: Pound Sterling Falls Below 1.2900

The Pound Sterling has dropped below the significant support level of 1.2900 against the US Dollar. The GBP/USD pair is trading within a Rising Channel pattern on the daily timeframe, with each pullback seen as a potential buying opportunity by traders. The Cable is currently holding above the key 20-day Exponential Moving Average (EMA), positioned around 1.2866.

The 14-day Relative Strength Index (RSI) is within the 40.00-60.00 range, indicating that bullish momentum has waned. Nonetheless, the overall bullish outlook remains.

On the upside, resistance is expected near the two-year high of 1.3140 for the Cable.