Key points:
The British pound (Symbol: GBPUSD) floated to a one-year high of $1.2985, driven by favourable economic data from both the UK and the US. The pair opened the week with positive momentum as forex traders responded to unexpected growth in the UK and easing inflation in the US.
Picture: GPBUSD reaches one-year high over stable UK inflation, as observed on the VT Markets app.
In the UK, inflation data for June showed a 2% annual growth, in line with the pace in May and slightly above projections of 1.9%. This growth above expectations led traders to invest in the sterling and reduced the likelihood of interest rate cuts by the Bank of England (BoE).
The BoE has indicated that it is monitoring for cooling price pressures before considering reducing borrowing costs.
The UK wage growth data indicated a slowdown but remained robust for the three months to May. Annual wage growth decreased to 5.7% from 6% in the previous three-month period ending in April.
Similarly, average weekly earnings reported a 5.7% annual growth for the same period. The British pound has been on a consistent upward trajectory, gaining 3.5% thus far in July.
Conversely, the US dollar is facing a tough week, trading lower against several forex peers.
Risks and opportunities for short term trading
The recent economic data suggests continued strength in the British pound, especially with inflation slightly above expectations and resilient wage growth. Traders should monitor support and resistance levels closely.
Any signals from the Bank of England regarding interest rates will also be crucial. Meanwhile, the weakness in the US dollar against major currencies can provide additional momentum for the GBPUSD pair.
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