The British pound has started the new trading week quietly, continuing the lack of activity we saw on Friday. GBP/USD is currently trading at 1.3845, up 0.15% on the day.
The UK will release key employment numbers for August on Tuesday. If the numbers are strong, it could give the British pound a significant boost. The Bank of England will be closely tuned in, as it tries to map out its monetary policy. Last week, BoE Governor Andrew Bailey said that policy makers were evenly split (4-4) between those who felt that minimum conditions had been met for a rate hike and those who did not. In the end, all eight members voted to hold rates at 0.10%. Still, the split opinions are a sign that the BoE is open to a tightening of policy, if key indicators point to an improving economy. With the BoE projecting that inflation will hit 4%, or double the Bank’s target, Bailey could well find that the Bank’s stance that inflation is transient to be an increasingly hard sell.
Inflation has been red-hot in the US. On Friday, PPI for August reiterated that inflation continues to climb. Headline PPI rose 8.3%, while Core PPI climbed 6.3%. The Federal Reserve insists that the higher inflation is transitory and that inflation will ease. However, if inflation shows no signs of abating in the final months of 2021, the markets will become more sceptical of the Fed’s stance, and policymakers may have to adjust monetary policy in order to curb inflation, which is well above the Fed’s target of 2%. The Fed Beige Book cast doubt on the Fed’s stance that the spike in inflation is temporary, and we could see more Fed members begin to question this view if inflation does not show signs of easing.
GBP/USD Technical Analysis
- There is resistance at 1.3904. Above, there is resistance at 1.3978
- On the downside, we have support at 1.3742 and 1.3654
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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