POUND REBOUNDS AFTER JACKSON HOLE

Pound performance

The GBP/USD currency pair, recently on an upward trajectory, reached a notable 15-month high of 1.3141 on July 14. However, a shift in sentiment resulted in an extended corrective phase, leading to the pair’s decline to a new two-month low of 1.25 last Friday. Nonetheless, a modest recovery has been visible. The pound began the week with moderate strength, partly influenced by hawkish remarks from Bank of England Deputy Governor Ben Broadbent at the Jackson Hole summit.

 

Support and Resistance Levels for GBP/USD

In the event of further downward pressure, the recent two-month low of 1.25 could serve as immediate support. If this level fails to halt the decline, the pair might extend the downside furiously. The downward momentum in the GBP/USD’s pullback seems to be moderating, though it’s still early to predict a complete reversal. However, establishing a new lower low might intensify the short-term decline, emphasizing the need for careful observation in the near term.

 

Assessment of GBP/USD scenario

Conversely, if the pair manages to halt its decline and initiates a rebound, the bullish side could target the recent resistance area around 1.28. A decisive break above this region might lead to a push towards the June peak of 1.2847, followed by the psychological barrier of 1.3000. Crossing this threshold could potentially pave the way for an attempt to challenge the 15-month peak of 1.3141.

 

Inflation data to Impact GBP

This week’s inflation releases carry considerable weight. German and Spanish figures are due on Tuesday, followed by French, Italian, and eurozone-wide data on Thursday. The consensus forecast suggests a drop in core CPI inflation from 5.5% to 5.3%, with ING economists projecting 5.4%. If this data supports another ECB rate hike, the euro could experience upward momentum. However, the influence of US payroll numbers should also be taken into account. With a sparse calendar in the UK, external factors are expected to steer GBP/USD movement. Notably, a Thursday speech by BoE Chief Economist Huw Pill could hold notable significance.

 

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