Pound Held Back by Dollar and UK Politics
The pound sterling held steady against the US dollar on Monday (July 6th). GBP/USD traded around 1.3357 after briefly touching a daily low of 1.3328.
The pound's movement remained subdued as markets remained in risk-off mode, making the US dollar more desirable. Although last week's US employment data was weaker than expected and expectations of a Fed rate hike began to wane, the dollar remained supported by cautious sentiment in global markets.
In the United States, last week's jobs report missed estimates, while April and May data were revised downwards. This situation led the market to believe the Fed would be less aggressive in raising interest rates. For the July meeting, the market estimated a 77% chance of the Fed holding interest rates, while the chance of a hike was only around 23%.
The US ISM Services PMI data also showed mixed signals. The services PMI was recorded at 54.0, in line with expectations, but down from 54.5 in the previous month. Input costs have begun to ease, while the service sector employment index improved from 47.9 to 51.2. This means the US service sector is still growing, but its momentum is not as strong as before.
In the UK, the economic calendar is relatively quiet. However, the pound still received some support from expectations that the Bank of England could raise interest rates again towards the end of the year. The swap market is now pricing in around 17 basis points of tightening, or a roughly 70% chance of one rate hike.
However, political uncertainty in the UK is weighing on GBP/USD. The market is still waiting to see who Andy Burnham will choose as the new finance minister. As long as there is no certainty, GBP/USD has the potential to consolidate around the 1.3300–1.3400 area. (arl)
Source: Newsmaker.id
