September 25, 2023

GBP/USD Maintains Simple Recovery Gains Under 1.3000; Bullish Convictions are Absent

Modest Gains for Leading Pairs in Tough Times

The GBP/USD currency pair is holding on tightly to its average intraday gain in the early stage of the European session, and it was last observed trading close to the daily highs a tad under mid-1.3000.

The pair has continued to display some signs of resilience while it drew some level of purchases near the 1.3000 benchmarks early on Tuesday as it broke through three consecutive days of its losing trend to the lowest points it has yet been since the month of November 2020. The uptrend was encouraged by some emergency selling of the US dollar, and it was boosted further by unexpectedly better United Kingdom monthly employment reports.

GBP/USD price chart. Source TradingView

As a matter of fact, the United Kingdom Office for National Statistics released data to indicate that the country’s unemployment rates dropped to 3.9% in the month of January in contrast with the speculated drop of 4.0% from the 4.1% in December. In addition to that, the number of people that claim benefits related to unemployment also dropped by 48,100 in the month of February when it is placed side by side with the 31,900 previously booked.

Bank of England to Go-Ahead to Interest Rate Increase

The reports confirmed market speculations that the Bank of England was going to increase interest rates in its next meeting scheduled for Thursday, and it went ahead to underpin the progress of the British pound. The pair, nevertheless, lacked sufficient bullish convictions while the sentiments in the market maintain a fragile edge as there are risks of more escalations in the ongoing war between Russia and Ukraine.

Aside from the political crisis engulfing Eastern Europe, the widespread acceptance of the potential start of the Federal Reserve’s monetary policy implementation cycle and the latest increase in the US Treasury bond yield is expected to be of benefit to the pair. This consequently calls for considerable caution on the side of aggressive bullish market players, especially before they position themselves for more increasing movement for the GBP/USD currency pair.

Investors are advised to pitch their tents on the sidelines for now while waiting for major central bank decisions to give clear directions on what next. The Federal Reserve is set to announce the result of its two-day meeting after it ends on Wednesday; it will then be closely followed by the Bank of England’s policy decision to be announced on Thursday. These events would play a major role while determining the next course of action for GBP/USD traders.  

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