The pound sterling advanced to nearly 1.3580 against the US dollar on Monday. Markets turned cautious ahead of key trade talks between the US and China. Amid declining labor data in the US and deflationary pressure in China, the meeting has garnered international attention. It is scheduled to take place later in London.
Investor sentiment remains volatile even as the value of the pound sterling increases. Additionally, this week’s US and UK labor and inflation reports will influence future actions. The UK economy prepares for a pivotal week ahead, while US President Trump’s optimistic post heightens the excitement.
Can the Pound Sterling Maintain Its Upward Momentum?
As the US dollar declines, the pound sterling gains strength due to cautious global markets before new trade negotiations. Washington and Beijing officials confirmed their participation in the June 9 event in London. According to President Trump, there is optimism that the talks will result in significant results.
However, markets remain cautious. According to Saxo Markets experts, the US dollar may continue to be under pressure unless there is a significant breakthrough. Furthermore, a weaker labor market contributed to the decline. The US Nonfarm Payrolls report released on Friday revealed downward revisions of 95,000 jobs for March and April. However, May job gains were marginally higher than anticipated at 139,000.
UK Data Week Keeps Market Focus Split
The UK economy is facing a significant data week. Investors look forward to the monthly GDP data and employment statistics that are due on Tuesday and Thursday. The unemployment rate is expected to increase to 4.6%, the highest level since July 2021, according to analysts. That might change what the Bank of England expects from interest rates.
However, a rate cut is unlikely given the UK’s Consumer Price Index’s April spike. Megan Greene, an MPC member, cautioned that inflation may persist, necessitating more cautious central bank actions. As a result, traders are closely monitoring average earnings data, which is predicted to increase by 5.5% annually.
Will the US Dollar Rebound After Fed Pressure?
The US dollar remained weak despite optimism that high-stakes trade negotiations would strengthen it. The Dollar Index fell to about 99.00 following Friday’s spike. Despite Trump’s attempt to boost confidence with his Truth Social post over the weekend, skepticism still reigns.
“Too late at the Fed is a disaster!” Trump posted, urging a full-point rate cut. However, the Federal Reserve may decide to wait due to rising inflation data that is due on Wednesday. Traders are being cautious because the central bank is under pressure to balance inflation and slowing growth.
Bullish Signals Support the Uptrend in Sterling
The pound sterling aims to retest its three-year high at 1.3617, having already risen to 1.3570. The rising 20-day exponential moving average, which is currently close to 1.3464, supports the upward trend. A Relative Strength Index value above 60 indicates sound purchasing.
Resistance is visible at the 1.3750 level, while support sits at 1.3434. A positive surprise from the UK economy could cause the value of the pound sterling to rise above its current range. However, if signals run counter to market optimism, wage and inflation data may restrict upward room.
Pound Sterling Holds Steady Amid Uncertainty
The future of the pound sterling is dependent on both domestic and international diplomacy. If UK inflation and employment data remain steady, the GBP may gain even more strength. However, muted results from US-China trade talks or higher-than-expected US inflation could refocus attention on the US dollar.
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