The British Pound remains bid and close to its highs for the year against the United States Dollar, thanks to support from both sides of the currency pair.
On the ‘GBP’ side, growth data have surprised to the upside. The United Kingdom’s Gross Domestic Product expanded by 0.4% in May. Growth flatlined in April but appears to be accelerating again out of the recession which clouded the end of 2023.
This surprise has seen bets reduced on an interest rate reduction in August. Before the numbers this was seen as highly likely, now the odds are down to about 50./50.
Moreover, after years of churn at the top of government, the UK is starting to look like a haven of political stability compared with its most obvious national peers. Its new government was installed this month with a massive electoral majority, adding to the Pound’s allure.
The US Dollar, meanwhile, has been knocked by more docile inflation numbers. These have kept alive the possibility that the Federal Reserve will at last start to reduce its interest rates in September with markets now betting on two quarter-point reductions before the end of the year.
The next major UK data event will be official inflation figures. That’s sure to be a big one for traders but it’s not due until July 17. The interim will likely see Dollar action setting the pace.
GBP/USD Technical Analysis
