The pound sterling surpasses its previous range as a result of high demand for the US dollar. Traders are currently directing their attention towards the upcoming release of nonfarm payroll data in the United States. This data is expected to have a significant impact on trading between GBP/USD, especially considering the shortened holiday week.
During the symposium hosted by the Feds, concerns about the global economy kept the US dollar in a dominant position. The strength of this currency can be attributed to various factors. This includes issues faced by Chinese property companies and a rate cut implemented by China’s People’s Bank. Additionally, multiple credit rating downgrades for US banks also contributed to this trend.
Nvidia, the American AI chip manufacturer, delivered positive financial results that offered some encouragement. However, the overall sentiment turned cautious due to unfavorable performance in the services industry and a contraction in manufacturing. Furthermore, there was a notable decrease in the August preliminary composite PMI index for the United States.
Factors Impacting GBP/USD and Concerns for the Pound Sterling
The pound sterling weakened against the US dollar due to the cautious outlook of the Bank of England and risk aversion. Meanwhile, the US dollar continued to gain strength, reaching its highest level in two months against other major currencies. This was partly driven by a surge in US Treasury bond yields, which reached their highest point in 16 years. Factors contributing to this rise include increased US Treasury issuance and credit downgrades. Others include concerns about China potentially selling off its holdings of US Treasuries and hawkish expectations from the Federal Reserve.
Initially, GBPUSD reacted positively to remarks made by Federal Reserve Chairman Jerome Powell at the Jackson Hole Economic Symposium. The pair briefly reached a key level at 1.26530 before quickly reversing course. Powell emphasized the possibility of further interest rate hikes amidst concerns about high inflation that need to be addressed. He also acknowledged that there is still work to be done to achieve price stability.
Note: Forexschoolonline.com is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results.