GBP Holds Gains Ahead Of US Data & UK Election Results

GBP/USD consolidates below round-number resistance of 1.2700 in London session on Wednesday after rebounding sharply from a three-day low of 1.2615 on Tuesday. The strong performance of GBP/USD was triggered by the speech of Federal Reserve Chairman Jerome Powell at the European Central Bank (ECB) Central Bank Forum on Tuesday, which triggered optimism about rate cuts and uncertain short-term outlook for the US dollar.

Powell said that recent data showed that the deflation process has resumed, but we need more good inflation data before cutting interest rates. Powell added that inflation risks are more balanced. He also said that unexpected weakness in the labor market may force them to respond on interest rates.

Powell’s increased confidence in the progress of deflation has kept speculation of a rate cut in September. Looking ahead, the main trigger for the US dollar will be the US June non-farm payrolls report (NFP) released on Friday.

During Wednesday’s session, investors will closely watch the ADP employment change, the US June ISM Services Purchasing Managers’ Index (PMI) data, and the minutes of the Federal Open Market Committee (FOMC) June meeting.

The ADP employment report is expected to show that private sector employers hired 160,000 job seekers, slightly higher than 152,000 in May. The ISM Services Purchasing Managers’ Index (PMI) is expected to be 52.5, down from 53.8 in the previous reading. Investors will also focus on the sub-indicator of the Services PMI – the “Prices Paid Index”, which shows cost pressures in the services sector.

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