– Written by
Frank Davies
STORY LINK GBP/USD Forecast: ISM Services and UK Politics Leave Pound Sterling Flat
The Pound US Dollar (GBP/USD) exchange rate traded in a narrow range on Monday, as easing UK political concerns and renewed dip-buying in the US Dollar (USD) left the pairing without a clear direction.
At the time of writing, GBP/USD was trading at $1.3352, virtually unchanged on the day.
The US Dollar found some support on Monday as US markets reopened after the extended Independence Day break.
The ‘Greenback’ appeared to have drifted into oversold territory following last week’s sharp selloff, which came after the latest non-farm payrolls report revealed a much steeper-than-expected slowdown in job creation.
This encouraged some bargain hunters back into the market, allowing the US Dollar to recoup a portion of its recent losses.
At the same time, the latest ISM services PMI matched forecasts, slipping from 54.5 in May to 54 in June. While the reading pointed to a modest loss of momentum, it remained comfortably in expansion territory, suggesting the US services sector was still performing relatively well.
The Pound (GBP) remained resilient on Monday as investors continued to unwind some of the political risk premium that had recently weighed on Sterling.
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Markets appear increasingly convinced that MP Andy Burnham will become the next Prime Minister without a prolonged Labour leadership contest causing further uncertainty.
Since announcing his bid for the Labour leadership, Burnham has attempted to calm market nerves by pledging to stick to the government’s current fiscal rules, while also setting out an ambitious economic agenda.
This has helped reassure GBP investors, allowing Sterling to hold firm as fears over UK political instability continue to fade.
Near-Term GBP/USD Forecast: US Jobs Data to Lift the US Dollar?
Looking ahead, Tuesday’s data calendar is relatively quiet, with the US weekly ADP employment change figure the only notable release.
Although not a top-tier indicator, the report could still lend the US Dollar some support if it points to solid growth in private-sector hiring.
Beyond the data, broader market sentiment may also drive movement in the pairing. A weaker appetite for risk could favour the safe-haven US Dollar, while a brighter mood may help the increasingly risk-sensitive Pound.
As a result, any shifts in risk appetite could leave GBP/USD trading unevenly.
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TAGS: Pound Dollar Forecasts
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