The GBPUSD exchange rate rallied against the USD after a holiday-induced USD sell-off. The UK Pound fell to a fresh low of $1.3088, while the US Dollar sat at $1.3100. This GBPUSD pair is a textbook example of a downtrend, as it is currently at the end of its longest downtrend in the last six months (S&P 500 is at the end of its longest downtrend in the last 3 months).
The British Pound Pound (GBP) has surged to its highest level in over a year on Wednesday, as the stronger-than-expected jobs data from the United States added to speculation that the Federal Reserve (Fed) could raise interest rates in December. Crown price soared to a one-week high of $1.4051 (GBP), up 1.88% from its previous close of $1.3829 (GBP).
The pound has made a sharp recovery today, bringing the day’s gains past the 2% mark and taking it to the highest level of the day, following a report that eased concerns about the UK economy. The pound has been bolstered by the latest news that the US dollar is on track to drop to a 13-year low .
- Pound rebounds as BOE promises action
- Strong Jobless Claims, but dollar weakens
- Markets rise in the second half of the year
On the foreign exchange market, there was a hint of recovery, particularly for sterling. Both the pound and the euro improved in early trade, with dollar strength, which has been very pronounced in recent weeks, taking a step back. This decline in the US dollar was all the more surprising as it came at the end of a week in which the US announced some of the best employment figures in history. Yet none of this helped the stock market catch its breath, and in the second half of the year it continued to rise.
Bank of England talks tough on inflation
The inflationary pressures creeping into markets around the world have caught the attention of most people, including those who trade in the major currencies in the foreign exchange market. While many countries are still considering the best course of action, with much debate and disagreement, the Governor of the Bank of England, Andrew Bailey, has spoken out clearly on the issue and confirmed that the Bank will use all the tools at its disposal to tackle the problem.
The move in the pound, which hit a multi-week low, seems to have more to do with the fact that the weakness in the US dollar is finally being noticed. Governor Bailey reiterated that we should not overreact to what he still considers temporary inflation, even though one of his top economists has said he expects the figure to reach 4% by the end of the year. The Brexit and the rising trend in COVID-19 cases also remain key issues for the pound.
Dollar falls despite impressive jobs numbers
Some of the most impressive employment figures to date have been released in the United States, at least since the start of the pandemic. Still, the dollar saw turnover today for the first time in weeks. The number of new applications for unemployment benefits last week was 364,000. This is a very low level for the pandemic era.
This number exceeded analysts’ expectations and was also significantly lower by more than 50,000 than the previous week. However, this was somewhat offset by an increase in continuing applications, which remain above 3 million. This could be an explanation for the weakness.
Markets continue to strengthen
Virtually all major indices on Wall Street posted impressive gains in the first half of 2021. In this way they overcame the fear of inflation that was present not only with Forex brokers, but also in the entire market.
Yesterday was another positive day overall, and the first day of the second half of 2021 looks good too. The fear of inflation is off the table for now because everything is working, at least for now. The big news at the end of the week is the employment report for June.
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