British Pound Rallies As U.S. Dollar Retreats

09/13/2022

1 minute read

2022.09.13 02:34

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MarketPulse

has started the trading week with sharp gains. In the European session, GBP/USD is trading at 1.1678, up 0.80% on the day.

Pound soars despite weak UK data

It’s a busy economic calendar this week in the UK. The markets were treated to a data dump today, highlighted by and . In July, GDP grew by a modest 0.2% MoM, shy of the estimate of 0.5%, but an improvement from the -0.6% reading in June. Manufacturing Production in July dipped to 1.1% YoY, down from 1.3% in June and missing the estimate of 1.7%.

Despite the lukewarm data, the pound has soared, which is clearly a case of US dollar weakness rather than UK strength. The dollar is lower today against the majors, with the exception of the . We could see more volatility from GBP/USD on Tuesday, with the UK releasing and the US publishing the August report.

The UK labour market remains robust, one of the few bright lights in a grim economic landscape. Unemployment rolls are expected to continue to drop, and wage growth, which has been moving higher (although much slower than inflation) is forecast to rise to 5.1% in July (3Mo/Yr), up from 4.7% in June.

All eyes will be on Tuesday’s US inflation report for August, with the markets expecting CPI to fall to 8.1%, down from 8.5%. This would mark a second straight decline, and would raise speculation that inflation has at last peaked. Following the unexpected drop in July’s inflation release, market exuberance that the Fed would make a U-turn on its aggressive tightening sent the equity markets up and the US dollar sharply. The Fed has stuck to its policy, and the markets appear to have a healthier respect for the Fed’s commitment to remain aggressive, with the market pricing in a 75 basis point hike at the meeting on September 21. Tuesday’s inflation report will be doubly important, as it marks the final economic release before the September meeting.

GBP/USD Daily Chart