GBP/USD starts the new week on a positive note | 22 July 2024

GBPUSD:

The Pound-Dollar pair attracted some buying during the Asian session on Monday and for the time being seems to have paused its corrective decline from the 1.3045 area, or the yearly peak reached last week. Spot prices are currently trading around 1.2930, up more than 0.10% on the day, although they remain near the weekly low set last Friday.

The US Dollar (USD) is starting the new week on a weak note, reacting to political events in the US over the weekend, and is proving to be a key factor providing some support to the GBP/USD pair. After a long week of political turmoil, US President Joe Biden has declined to run in the 2024 presidential election. This in turn raises the chances of Donald Trump becoming the next US President, which, along with bets that the Federal Reserve (Fed) will cut interest rates in September, increases investor appetite for riskier assets and undermines the safe-haven US Dollar.

The British Pound (GBP), on the other hand, continues to receive support from Bank of England (BoE) policy in August. In fact, Bank of England Chief Economist Hugh Pill noted earlier this month that there is still some work to be done before the domestic permanent component of inflation disappears. To add to this, UK consumer inflation rose slightly more than expected in June, up 2% year-on-year. This came on the back of better than expected GDP growth of 0.4% in May and led investors to abandon expectations of a rate cut soon.

On Monday, no market-important economic data will be released either from the UK or the US, so the GBP/USD pair will be at the mercy of the USD price dynamics. Thus, the market's attention will remain focused on political events in the US, which will determine the broader risk sentiment and influence the buck's exchange rate. Nevertheless, the aforementioned fundamental background seems to be leaning in favor of bullish traders and supports the prospects for further intraday growth of the currency pair.

Trading recommendation: Trade mainly with Buy orders from the current price level.

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