GBP/USD stuck at 1.31 for the week?

Justin Freeman
Meeting room with Forex Price Graphs on the windows

Sterling seems destined to remain close to the 1.31 level in its pair with the dollar at the moment.

In some ways, this is good news for the pound.

It has suffered significantly in recent months thanks to Brexit and the coronavirus pandemic, and the 1.31 area represents something of a recovery for it.

However, away from long-term views, it is perhaps unsurprising that it is now surging against the dollar.

The latter currency has suffered from serious political gridlock in the US recently, and it has declined overall in most of its major pairs in the last few weeks.

According to some strategists, the pound is now beginning to look overbought in this pair.

The Relative Strength Index (RSI) measures the extent to which a currency may be oversold.

By this metric, the GBP/USD pair is currently at 79.9.

This development led some analysts to suggest that the pound’s recent resurgence is unlikely to be replicated in the short term.

One key factor in the pound’s performance against the dollar over the next few days is likely to be any further news from the US regarding the health of the increasingly fragile economy there.

The US currency is facing a number of external events on that front.

The normal week-on-week jobless figures will be out on Thursday at 12:30pm GMT.

Initial jobless claims for the dates around 31st July will be out, and are expected to show a slight reduction from 1,434,000 to 1,415,000.

If this transpires, it is likely to be welcomed by dollar traders, who might interpret it as a sign that the labour market is getting back onto its feet following the coronavirus pandemic.

Continuing jobless claims for the previous week are also forecast to show a drop.

This time, the drop is expected to be from just over 17,000,000 to 16,839,000.

It will be out in the same time slot of 12:30pm GMT.

Looking to next week, meanwhile, the US dollar will be back in the spotlight when producer price index details for July come out at 12:30pm GMT.

These are set to show a year-on-year change from -0.8% to -0.3% on a year-on-year basis.

On a month-on-month basis, meanwhile, it is expected that the index will go back into positive territory.

It is forecast to go from -0.2% to +0.3%.

Consumer price index figures, meanwhile, are expected on Wednesday.

These will be out in the 12:30pm GMT time slot and are forecast to show a year-on-year rise for July from 0.6% to 0.8%.

Month on month, meanwhile, they are set to go from 0.6% to 0.3%.

Another metric out of the US on Wednesday is also likely to be monitored.

The EIA crude oil stocks change data no doubt will be observed given the recent volatility of the price of oil.

Justin Freeman

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