The Pound Sterling is showing stability against major currencies. Traders are especially focused on the upcoming UK S&P Global PMI data for July, which will be released on Thursday. This data will help us understand how the recent hiring slowdown is affecting the economy. Analysts expect the UK PMI to show moderate growth in business activity. The Composite PMI is predicted to drop slightly from 52.0 in June to 51.9.

GBP/USD Analysis

On Monday, GBP/USD rose by about 0.6%, recovering a lot of the losses from the previous week. The pair is now consolidating just below 1.3500, with trends suggesting a possible upward shift. The decline in the US Dollar is helping GBP/USD make a comeback. Concerns about the Federal Reserve’s independence and Jerome Powell’s future have put pressure on the dollar, especially with no major data releases to offset this. Given the pound’s current stability, the upcoming UK S&P Global PMI data is crucial for traders. A stronger-than-expected result could strengthen the Bank of England’s stance and push the pound higher. The latest Flash UK Composite PMI for July surprised analysts by rising to 52.8, showing the fastest growth in the private sector in over a year. This strong UK data, primarily from the services sector, implies that buying call options on the pound could be a smart move. It signals that the UK economy is holding up well despite the hiring slowdown. Traders might think about purchasing short-term GBP/USD call options to take advantage of a potential rise after the official data release.

US Dollar Weakness

The pound’s recovery is largely due to the ongoing selling of the US Dollar. The latest US Consumer Price Index (CPI) showed inflation dropped to 3.0% annually, marking the lowest rate in over two years. This has increased expectations that the Federal Reserve is close to ending its cycle of interest rate hikes, which puts pressure on the dollar. Concerns about the Federal Reserve and its chair’s next steps are valid. This situation is reminiscent of late 2018 when signs of an economic slowdown led to a shift in policy and weaker dollar performance. We expect this trend to continue influencing the currency pair’s direction. With GBP/USD stabilizing just below the 1.2800 level, technical indicators show a bullish outlook. A bull call spread could be an effective strategy for profiting from a modest rise while limiting potential losses if the market stays flat. This approach aligns with the current perspective of UK strength against rising uncertainty in the US. Create your live VT Markets account and start trading now.

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