Global economic problems and the Fed’s aggressive stance cause the GBP/USD to drop to two-month lows.

As a result of worries about the status of the world economy and China’s real estate sector, the GBP/USD exchange rate declines by 0.18%.

Powell’s bullish comments about inflation and rate rises at Jackson Hole propelled the US Dollar Index (DXY) forward 0.19% to about two-month highs.

The US economy is showing mixed results, including lower-than-expected initial claims for unemployment benefits, which makes traders wary about raising interest rates.

In terms of the US Dollar (USD), the Pound Sterling (GBP) finished the week on a lower note, slipping to maintain above the 1.2600 level as the GBP/USD pair fell to new two-month lows. The pair, which reached a daily high of 1.2654, is currently trading at 1.2576 as the New York session comes to a close, down 0.18%.

pound struggles with risk-averse mindset, but strong Markets watch the US economic statistics coming out next week as the US dollar sags.

Numerous variables had an impact on the GBP/USD. Reports that global economic activity was slowing, as indicated by S&P Global PMIs published in the US and the UK, prompted movements into safety in a risk-off mindset and put pressure on the currencies. Concerns about a global economic slump were further heightened by China’s real estate market problems, which included Country Garden being dropped from the Hong Kong Hang Seng index and Evergrande declaring bankruptcy in New York on Friday.

The US Dollar Index (DXY), which gauges the performance of the dollar against a basket of six different currencies, including the Cable, showed that the Greenback (USD) increased as a result. It increased by 0.19% to close the week at 104.187, or around fresh two-month highs.

According to the US Bureau of Labor Statistics (BLS), data from the US showed a mixed picture for orders for durable goods while the labor market remained robust. The US Federal Reserve (Fed) should raise interest rates again, as Chair Jerome Powell stressed in his speech at the Jackson Hole Symposium on Friday. Initial Jobless Claims increased by 230K for the week ending August 19, below predictions of 239K.

Jerome Powell, the chairman of the US Federal Reserve, emphasized the central bank’s persistent concerns about high inflation at Jackson Hole. He said that additional rate increases might be “appropriate,” but he also emphasized that the US central bank will still depend on incoming data. Although the process of disinflation has accelerated in recent months, Powell noted that there is still a long way to go and emphasized the importance of maintaining alignment with the Fed’s 2% inflation target.

According to Powell, further tightening measures may be possible given the strong economic expansion and the tight labor market. He stated that if these encouraging economic indicators do not show indications of slowing, further rate hikes will be necessary.

Patrick Harker of the Philadelphia Fed recently said that the present interest rates are already at a high level that is constraining, and if inflation slows down, it might be necessary to raise rates further. On the other hand, GDP and labor market data, as shown by Cleveland Fed President Loretta Mester, show that the economy has picked up speed. She emphasized that a slower growth rate would be required to restrain inflation while also highlighting the ongoing discussion about whether the current rates are too restrictive to meet the inflation target.

The UK economic docket won’t be on the agenda next week. However, the US economic docket will include the CB Consumer Confidence report, the JOLTs report, the ISM PMI, preliminary GDP data, inflation statistics, and other Fed speakers.

Technical outlook for the price of the pound against the dollar

The 200-day Moving Average (DMA) at 1.2397 may be tested even if the GBP/USD daily chart shows the pair as neutral to negatively inclined. However, a break below the most recent market structure swing bottom at 1.2590 could make this more likely. Sellers must first lower the exchange rate below the level of 1.2500. The 1.2400 figure and 200-DMA would be revealed at a breach of the latter. On the other hand, a comeback towards the 1.2700 level may be possible if buyers retake the 1.2600 level.

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