Pound Falters, Dollar Gains Momentum
The pound sterling weakened slightly against the US dollar during Friday's trading (July 31). The GBP/USD pair hovered around 1.3450 as the dollar attempted to recover from sharp pressure in the previous session. Despite this correction, the pound remains on track for its best monthly performance since April.
The dollar's recovery remains limited, as the US currency is on a path toward a significant weekly decline. Earlier pressure was triggered by a sharp appreciation of the yen following suspected Japanese intervention, compounded by market uncertainty regarding the Federal Reserve's interest rate policy direction.
Recent data shows US consumer sentiment rose to 55.2 in July, surpassing the preliminary estimate of 54.4. Improvements were observed across various groups based on income, age, education, and political affiliation. One-year inflation expectations stood at 4.2%, while the five-to-ten-year outlook remained steady at 3.3%.
However, US economic growth in the second quarter was slower than anticipated. Core PCE inflation rose only 0.1% in June compared to the previous month, leading markets to scale back expectations for Fed rate hikes. A lack of clear signals from Fed official Kevin Warsh also contributed to the dollar's unstable trajectory.
Inflationary pressures remain a concern after three Fed officials advocated for a 25-basis-point rate hike. Lorie Logan, Beth Hammack, and Neel Kashkari assessed that current policy is insufficiently tight and warned that delaying action risks forcing the Fed to take more aggressive measures in the future.
In the UK, the Bank of England maintained interest rates at 3.75%, though three officials supported a hike to 4% due to risks associated with energy inflation.
Newsmaker Analysis: GBP/USD has the potential to remain resilient if expectations for UK rate hikes hold firm. However, concerns regarding the fiscal stance of Prime Minister Andy Burnham's government could cap the pound's gains, particularly if the dollar continues its recovery. (arl)
Source: Newsmaker.id
