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Can the GBP/USD maintain its current upward momentum?
18.07.2022

The GBP/USD has increased by 0.84% as the Pound maintains momentum against the Dollar throughout both the Asian and European sessions. The US Dollar has been seeing a general decline against all other currencies since Friday. On the other hand, the Pound has gained against other currencies. Both of these developments continue to influence the GBP/USD currency pair.

When looking at the pair, we can see that the price is experiencing a stronger bullish momentum than we are seeing with other major currency pairs. The price movement of the GBP/USD is now approaching a higher wave as it attempts to cross the 1.1967 price level. When looking at the 4-hour timeframe we can see that the moving averages have crossed upwards and the price is close to trading above the volume-weighted average price.

Traders will be looking to see if the price is able to maintain momentum once the US trading session opens. The price of the exchange rate has previously experienced upward movements such as on the 4th and 7th of July, but the trend continued in favor of the US Dollar. This is something that traders are keeping in mind.

The increase in demand for the British Pound has been mainly triggered by the Bank of England’s remarks over the nation’s interest rates. Last week, members of the monetary policy committee, including Michael Saunders, advised that the central bank is likely to continue increasing interest rates even as the economy shows signs of stagnation. According to members of the MPC (Monetary Policy Committee), the risks of not increasing interest rates quickly outweigh the risk associated with stagnation.

In addition to the monetary policy, the market will also follow the scheduled economic releases. The UK Unemployment Rate, which is scheduled to be confirmed tomorrow, is predicted to remain at the 3.8% mark. Average Earnings Including Bonus is also likely to correct upwards by 6.9%, slightly above the 6.8% shown in April 2022. In addition to this, the market will be closely monitoring comments made by the MPC. For example, Mr Saunders is again expected to speak this afternoon about the resolution's foundation.

As mentioned above, the US Dollar is weakening against all market competitors, though the fundamental picture has not greatly changed from the previous week when we saw gains of a high magnitude. The US Dollar continues to be influenced by the potential rise in interest rates as well as its safe haven status.

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Despite recording some gains last week, the stock market continues to underperform, along with other risk-based markets. This has increased the demand for safe-haven assets such as the US Dollar.

The Secretary of the US Treasury, Ms. Yellen advised that the rapid increase in the exchange rate is not related to the possible intervention of the Federal Reserve and the monetary policy but is a consequence of the active recovery of the national economy. However, the official's rhetoric raised serious doubts among investors.

According to the GDP (Gross Domestic Product) figures, which declined to 3.5% from 5.5%, and experts from the Atlanta Fed, the economic slowdown can only intensify and amount to -1.2% in the second quarter, which contradicts the Treasury.

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