Key Points
- Pound surges after UK elections.
- Powell to face pressure.
- US inflation on the horizon.
- GBP/USD to continue higher?
Pound Surges After UK Elections
Last week, Labour’s Keir Starmer emerged triumphant in the UK elections to become the new UK Prime Minister. The victory was a historic landslide, and this week, he will carry out his first important duties as the Prime Minister. Near the top of the list will be the aim of stabilising the UK economy.
The early signs have been positive. According to Bloomberg, hedge fund bets on a stronger pound surged to their highest in more than six years, thanks to investors’ confidence that Keir Starmer’s appointment will stabilize the UK economy and politics.
Powell To Face Pressure
Jerome Powell will face pressure this week from lawmakers as there is growing impatience about the Federal Reserve’s plan to cut interest rates. He will head to Capitol Hill for his semiannual testimony in what will be the last public appearance before the US elections.
The message has been clear for months: ” We must stay higher for longer.” Powell is likely to defend this stance in the testimony, but with the bar set so high for a hawkish Powell, there is a risk that any change in the language used could cause more dollar weakness.
US Inflation On The Horizon
In an ideal world, Jerome Powell would probably prefer to see the inflation report before his testimony, but the important Consumer Price Index (CPI) release is due out on Thursday. In any environment, this will cause volatility, but with the headline figure failing to dip below 3%, are Powell’s “higher for longer” remarks justified?
Look for a figure below 3% to send GBPUSD surging and a figure above 3.3% to generate a pullback in the recent trend. Either way, GBPUSD is producing fantastic trading opportunities right now.
GBPUSD To Continue Higher?
In the last week, the market structure of GBPUSD has turned from bearish to bullish. This is evident from the consecutive “Break of High” on the H4 chart. However, a stiff test could be on the way.
GBPUSD has reacted from a bearish order block, which started the momentum shift on June 12th, when the dollar picked up speed. This makes 1.28609 a critical high; should that break, GBPUSD will likely continue a march higher toward 1.29000. However, should US inflation come in strong again, we may see a fall back to 1.28000. There are crucial times ahead.
Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
