The British Pound rally led the Cable to a three-month high in June as the currency broke through a strong resistance level of 1.2650. Both the US Dollar and the Pound itself provided many reasons for such legging. The Greenback is weakening as the safe-haven asset amid falling demand and the rising sentiment for risk in financial markets. Surprisingly, the recent NonFarm Payrolls data that turned out to be unexpectedly positive for the US did not spur a Greenback strengthening. Investors consider such positive numbers as a recovery not only for the American economy but also for the global economy .
The intensions of the British government to ease quarantine measures, may put the flagging UK economy on the way to recovery amid rising local demand. The Pound was also supported by another round of Brexit negotiations with the European Union that ended last Friday.
But the rally seems to fade. And again both the Cable and Greenback may contribute to a possible reversal. The fourth round of the UK-EU negotiations ended without any particular ground breaking results despite both sides claiming that they are devoted to reaching an agreement.
On the other hand, investors are assessing what is happening in all markets ahead of the Federal Reserve (Fed) FOMC meeting this Wednesday. Jerome Powell, Fed’s Chair, has now less reason to continue his dovish rhetoric after the release of strong data on the US labour market.
Technically, the trend of the USD/GBP could be treated as descending considering the data from December 2019. A strong rally from 1.1410 in the Cable since mid-March may be addressed as a correction to this trend. As the Cable bumped into a strong resistance of 1.2770 that is unlikely to be broken, the most possible scenario may lead the Pound to at least the 1.2500-1.2550 area.
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