Pound Sterling gains against US Dollar ahead of Fed Powell’s speech
- The Pound Sterling gains against its major peers on Thursday after the release of better-than-expected UK GDP data.
- Manufacturing and Industrial Production declined at a faster pace on a monthly basis in March.
- Investors await Fed Powell’s speech for fresh interest rate guidance.
The Pound Sterling (GBP) jumps to near 1.3300 against the US Dollar in European trading hours. The GBP/USD pair gains as the US Dollar trades lower ahead of the Sterling climbs to near 1.3300 against the US Dollar on Thursday. The GBP/USD pair holds above the 20-day Exponential Moving Average (EMA), which trades around 1.3256, suggesting that the near-term trend is bullish.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range. A fresh bullish momentum would appear if the RSI breaks above 60.00.
On the upside, the three-year high of 1.3445 will be a key hurdle for the pair. Looking down, the psychological level of 1.3000 will act as a major support area.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022.
Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.