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4 July 2024 | FXGT.com

GBP/USD Gains on Weak US Data and Strong UK Services Ahead of Election

  • Pound Performance and USD Weakness: The pound held at $1.2750, after gaining 0.46% on Wednesday and hitting a three-week high. The GBP/USD pair has been boosted largely due to the weakening of the US dollar. US economic data, such as the ISM report, showed contraction in the economy, impacting the dollar’s strength.
  • US Economic Data Impact: Weaker-than-expected US economic data, including services and ADP employment reports, signalled a slowing economy. Initial unemployment claims rose last week, adding to expectations of a weakening labour market and potential rate cuts from the Fed later this year. Markets are now anticipating nearly 50 basis points of Fed rate cuts in 2024, starting with a 25-basis-point cut in September.
  • UK Services Sector Strength: The UK services PMI, representing a dominant sector of the economy, showed stronger-than-expected growth, supporting the pound. This resilience in the services sector adds to the positive outlook for the pound amidst political and economic uncertainties.
  • UK Political Landscape: Polls opened in the UK’s general election today, with the opposition Labour Party strongly favoured to take power, ending 14 years of Conservative rule. This suggests a significant shift in the UK political landscape. British voters are poised to elect Labour Party leader Keir Starmer as the next prime minister. Market reactions have been limited due to Labour’s consistent lead in opinion polls, with final election results expected around 23:00 UK time.
  • Market Sentiment: The combination of potential Fed rate cuts and political developments in the UK is influencing current market sentiment. The pound could see continued support if Labour secures a strong mandate, and the US economic outlook remains weak.
  • Upcoming US Data: US markets are closed Today for the July 4th holiday. The US non-farm payrolls report, due tomorrow, is expected to show an increase of 190,000 jobs in June, down from 272,000 in May.
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