Pound Sterling Weak Before Us Cpi

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Pound Sterling Weak Before Us Cpi

Pound Sterling Weak Ahead Of Us CPI

Pound Sterling (GBP) appears to be struggling near the 1.3100 support against the Dollar on Monday. The path of least resistance for GBP/USD is towards the downside as the US Dollar enjoys renewed buying.

As of now, DXY is seen near 101.40 and is trading with a bullish bias. The recent upside in the DXY is due to the diminished hopes of an aggressive rate cut by the Federal Reserve this month.

Fewer Chances Of Deeper Rate Cut By Federal Reserve

The recent NFP report was also very weak, showing that the effects of high interest rates have started to show up in the US labor market.

The FedWatch Tool shows that the chances of a 50 bps rate cut by the Federal Reserve is only 5% and has gone down from around 41% a few weeks ago.

The NFP report has revealed a bigger picture that the labor market is cooling down when compared with the reading from the last few years. The unemployment rate has also gone down while the wage growth jumped higher in August.

So, while the labor market is now weaker than before, it is not as weak to warrant a deeper rate cut. Also, the chances of the US economy going into a recession have also gone down.

Now, the investors await the US CPI for August to get fresh insights into the upcoming rate cut from Federal Reserve. According to forecasts, the core and headline CPI will jump higher by 0.2%. On the other hand, the headline CPI will move lower from 2.9% to around 2.6%.

The bottom line is that GBP/USD is moving lower with the next support at 1.3075, where the 20 EMA is present. Any more selling pressure will take us to 1.2828, which is the high from December and is now acting as support.

The RSI shows a reading between the 40 - 60 range, which is a sign that GBP bulls are struggling against the US Dollar. On the way up, the first resistance is at 1.3200, followed by the next one at 1.3500.

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