GBP/USD has seen a decline as the US Dollar maintains its strength, following July’s PCE inflation rate, which accelerated to 0.2%, surpassing market expectations. Oil prices declined following an agreement between Iran and Oman regarding the Strait of Hormuz, alleviating short-term inflation concerns. Pound sentiment weakened following disappointing CBI business data and a shift in policy expectations, according to Scotiabank. GBP/USD continues to exhibit a lack of momentum for the second consecutive day, hovering near 1.3590 during the European trading session on Thursday. The pair depreciates as the US Dollar remains stronger following the robust economic data released on Wednesday.
In July, the PCE price index increased by 0.2% on a month-on-month basis, surpassing the consensus estimate of 0.1%. Meanwhile, the annual rate held steady at 3.7%, slightly above the anticipated 3.6%. This unexpected increase has bolstered market expectations that the Federal Reserve may implement one last rate hike before the end of the year, prompting investors to keenly anticipate policy signals from Fed Chair Kevin Warsh’s address at the forthcoming Jackson Hole symposium. Crude oil prices have experienced a decline as diplomatic progress has been made in the Middle East, with Iran and Oman reaching an agreement on territorial waters and revenue-sharing in the Strait of Hormuz. This development has alleviated immediate concerns regarding inflation.
Meanwhile, fiscal scrutiny intensified over the US Treasury’s plan to double bond buybacks, a move sharply criticised by billionaire investor Stanley Druckenmiller as detrimental to market credibility and a missed opportunity for meaningful debt reform. Strategists observe that recent fundamental news flow for the Pound has been relatively light, with attention focused on “disappointing second-tier CBI business sentiment data” and a shift in the policy outlook. They note that “BoE rate expectations have softened somewhat, eroding fundamental support via yield spreads,” leaving the currency more vulnerable in the near term as yield-based support diminishes. In the daily chart, GBP/USD is positioned at 1.3590, exhibiting a slightly bullish inclination as the price remains above the 50-day Exponential Moving Average, while testing immediate resistance at the nine-day EMA.
The 14-day Relative Strength Index at approximately 60 maintains a constructive outlook without indicating overbought conditions, implying that upward momentum continues but may require a definitive breach of the short-term EMA resistance to further the upward trajectory. On the downside, initial support emerges at the 50-day EMA near 1.3473, where a sustained hold would keep the broader recovery structure intact. On the topside, the nine-day EMA at 1.3593 represents the initial obstacle; a daily close above this threshold would pave the way for a continuation of the recent bullish trend, while repeated failures at this level would suggest a period of consolidation or a slight retracement toward the underlying moving-average base.
