The British pound has had a good week, rising versus a basket of currencies by more than one week’s worth. The British pound has gained more than two significant numbers versus the US dollar this week, more than one significant figure against the Euro, and by roughly one and a half significant figures against the Japanese yen. The recent UK inflation report showed that price pressures were lessening, albeit slowly. This has led many to believe that the Bank of England will need to keep raising interest rates for the foreseeable future in order to get inflation back to target. In response, the market generally expects the Federal Reserve to halt its rate-hike programme this month, while the European Central Bank (ECB) may moderate its programme after recent data showed inflation dropping in the Euro Area at a better-than-expected pace. The new governor of the Bank of Japan (BoJ) has recently stated that easy monetary policy will continue in Japan until inflation consistently reaches the BoJ’s target.
There isn’t much in the way of potentially market-moving economic data or events scheduled for release in the United States in the next week, and the international economic calendar is similarly low on major events.
After dipping below 1.2300 late last week, Cable is now trading above 1.2500 with a constructive technical situation. Despite the fact that the pair has entered overbought territory as a result of the rebound this week, the GBP/USD is currently trading above all three simple moving averages for the first time since the middle of May. Overbought conditions could limit any gains, but a break over 1.2547 would set up a test of May’s multi-month high in the weeks ahead.
GBP/USD DAILY PRICE CHART – JUNE 2, 2023
The move lower in EUR/GBP is slightly more dramatic than the move lower in cable, with the current sell-off displaying an uninterrupted run of red candles. The pair is trading below all three simple moving averages, with the 20- and 50-day moving averages crossing below the longer-term 200-day moving average. Support at 0.8549 could come into action soon.
DAILY EUR/GBP PRICE CHART – JUNE 2, 2023
Since late March, the pound to yen exchange rate has been on a reasonably consistent upward trend, reaching its highest level since early 2016 today. Further gains in the pair may be expected in the coming weeks if the Bank of Japan maintains its loose monetary policy. The chart shows success, with goals of 175 and 177 within reach. The Bank of Japan (BoJ) has a history of intervening verbally when the Yen weakens substantially, thus their words should be treated with caution.
GBP/JPY DAILY PRICE CHART – JUNE 2, 2023
