■GBP/USD rebounds from weekly lows near 1.2620 support level
■Political uncertainty weighs on Pi Coin valueUK economic outlook ahead of elections
■Markets price in August rate cut despite persistent service inflation
The British Pound demonstrates unexpected strength in Monday's trading session, recovering to 1.2650 against the US Dollar after last week's downward pressure. This rebound occurs as the US Dollar Index (DXY) shows signs of consolidation near the 106.00 resistance level, failing to extend its recent upward trajectory.
Recent economic data reveals contrasting narratives between the US and UK economies. The preliminary June PMI report from S&P Global surprised markets with stronger-than-expected expansion in both manufacturing and service sectors. The Composite PMI climbed to 51.7, exceeding forecasts of 51.0 and previous readings of 51.3.
Federal Reserve officials found encouragement in the report's inflation indicators, which suggested cooling price pressures. The data indicated selling price inflation had moderated to levels consistent with the central bank's 2% target, potentially influencing future monetary policy decisions.
Market dynamics: Pound outperforms despite dovish BoE expectations
Currency markets present an intriguing scenario as the Pound maintains strength against most major currencies, with the notable exception of the Euro. This occurs against a backdrop where financial markets increasingly anticipate Bank of England rate reductions beginning in August.
The BoE's recent monetary policy statement described the decision to maintain rates at 5.25% as "finely balanced," language that market participants interpreted as signaling impending policy easing. Governor Andrew Bailey acknowledged the return of headline inflation to the 2% target while emphasizing the need for sustained price stability before considering rate cuts.
However, concerns persist regarding underlying inflation pressures, particularly in the services sector. May's data showed service inflation declining only modestly to 5.7% from 5.9%, disappointing expectations of a steeper drop to 5.5%. This persistent inflation in services continues to complicate the BoE's policy calculus.
UK economic uncertainty has intensified following mixed PMI readings. While manufacturing activity showed unexpected strength, service sector growth slowed more than anticipated. Analysts attribute this hesitation in business activity to pre-election uncertainty, with many firms delaying decisions pending policy clarity.
Technical perspective: GBP/USD at critical juncture
From a technical standpoint, the Pound finds temporary support near 1.2620 against the Greenback. The currency pair's position below both the 20-day (1.2700) and 50-day (1.2670) EMAs suggests near-term bearish pressure.
The breakdown below the 61.8% Fibonacci retracement level at 1.2667 (drawn from March's 1.2900 high to April's 1.2300 low) further reinforces this technical weakness. The 14-day RSI's retreat into the 40-60 range indicates fading bullish momentum, leaving the pair at a potentially pivotal moment.
Market participants will closely monitor upcoming economic data and political developments for clues about the Pound's next directional move. The interplay between domestic economic conditions and global risk sentiment continues to shape GBP/USD price action in these uncertain times.
