The Pound Sterling is rising against the US Dollar, reaching around 1.3330 during the European session. This follows weaker-than-expected US Producer Price Index (PPI) data and a small increase in Retail Sales, which caused the US Dollar Index to drop to about 100.50. The US PPI fell due to a slowdown in sectors like hospitality, largely affected by decreased tourism. Retail Sales only grew by 0.1%, a significant drop from last month’s increase of 1.5%, influenced by anticipated tariff changes. These factors have led to a decline in 10-year US Treasury Yields from a peak of 4.55% to roughly 4.40%.

US Federal Reserve Expectations

Despite this, traders still expect steady interest rates from the US Federal Reserve, as indicated by the CME FedWatch tool. Attention now turns to the upcoming US Consumer Sentiment Index and inflation expectations data. In the UK, the Pound Sterling weakened against other currencies after positive GDP data was released, except against the US Dollar. This growth suggests that the Bank of England may hold interest rates steady. Traders are looking forward to the UK CPI data for more insight into inflation and future rate decisions. The technical picture shows the GBP/USD pair is above the 20-day Exponential Moving Average (EMA), with the Relative Strength Index (RSI) between 40 and 60. The pair faces resistance at 1.3445 and has support at the key level of 1.3000. This recent rise in the pound nearing 1.3330 reflects more than just a dip in the dollar’s strength. The disappointing PPI data from the US, primarily due to weak demand in hospitality and retail sectors, has shifted market sentiment. Retail sales growth only reached 0.1%, far from last month’s surprising 1.5% rise, leading to low confidence. These weaker data points suggest that consumers are adapting to expected changes in foreign trade policy, particularly regarding tariffs. As a result, the 10-year Treasury yield has dropped from its recent highs, now around 4.40%. This shift indicates that even with some economic strength, the Fed may not tighten rates further. However, futures markets have not yet factored in any upcoming rate cuts, according to the CME FedWatch tool. The prevailing view remains that rates will stay steady for now.

Sterling and GDP Data

Domestically, the gains in the Pound haven’t been uniform. The recent positive GDP data provided a small boost against other currencies, but its strength against the dollar relies more on dollar weakness than a clear endorsement of UK growth. Still, the improving economy suggests that the Bank of England might not need to act urgently, allowing current interest rates to remain longer than expected. Now, we await the UK CPI data, which is significant. This will show whether inflationary pressure is easing or holding steady, potentially influencing market expectations for interest rates in the coming weeks. Currently, expectations for fast action have lessened; unless the CPI results are surprising, rate guidance is likely to remain stable. On the charts, the GBP/USD pair stays relatively stable above the 20-day EMA. The RSI, between 40 and 60, suggests no major buying or selling pressure, indicating a need for a clearer fundamental catalyst for short-term price movements. Immediate resistance is at 1.3445; without breaking that level, any upward movements may lack momentum. On the flip side, the psychological level of 1.3000 offers solid support for traders to assess reversal or further downside potential. In derivative markets, pricing has become more sensitive to short-term data shocks. With US Consumer Sentiment and inflation expectations data coming soon, we might see some adjustments in rate predictions—possibly even slight downward shifts—that could provide temporary support. Positioning should remain balanced unless there’s a significant change in rate statements or surprises in the upcoming data. Right now, directional confidence is data-sensitive and slightly influenced by the recent dollar weakness rather than inherent strength in Sterling. Create your live VT Markets account and start trading now.

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