- The dollar gains momentum late on Friday and cuts weekly losses.
- The pound points to the biggest weekly gain since May.
- Key events next week: meeting of the NFP and the Bank of England.
The pair GBP/USD It was unable to sustain gains on Friday and fell to 1.3890, hitting the lowest levels since Wednesday. Despite the slide, the pound is poised to post its biggest weekly gain since early May, driven by a weaker US dollar across the board.
The dollar gained momentum late on Friday and trimmed weekly losses. The dollar rose even as US yields fell. The US economic data did not surprise market participants. The relevant report was the PCE Core index which rose 0.4% in June, below the 0.6% of the market consensus.
GBP / USD is hovering around 1.3900 / 10, at the same level as the 20-week simple moving average. Failure to break out and hold could show signs of some bullish exhaustion, which would favor a correction. The 1.3730 area re-emerges as a relevant support. A firm break above 1.4000 next week should clear the way for more gains.
From the Fed to the BoE and NFP
The US dollar did not benefit from the FOMC events. From Wednesday to Friday night, it fell across the board. Next week, the key report will be the Non-Farm Payroll Report. “Payrolls probably picked up again in July, at a slightly higher pace from + 850,000 in June. Data from Homebase suggests some acceleration in the private sector, while government payrolls likely benefited from favorable seasonal adjustments. We anticipate another 0.3% MoM increase in median hourly earnings. The 12-month change is likely to rise again to 3.8% from 3.6% in June, ”wrote analysts at TD Securities.
In the UK, the focus continues to be on COVID-19 developments. If cases accelerate, it could hurt market optimism about the economic recovery. Next week the Bank of England will meet. No changes in monetary policy are expected. “We are more confident in our bullish outlook on the GBP. While there is a risk that the Bank of England disappoints the hawks’ expectations next week, any weakness in the British pound should be temporary, ”said MUFG Bank analysts.
Technical levels
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