Market Analysis

The Pound Sterling (GBP) has fallen further, approaching 1.2700 against the US Dollar (USD) during Tuesday’s London trading session. The GBP/USD pair has weakened as the US Dollar stabilizes after recovering from a recent six-month low. The US Dollar Index (DXY), which measures the greenback’s strength against six major currencies, has risen to around 103.00.

The outlook for the US Dollar remains uncertain as concerns about a potential US recession and possible emergency rate cuts by the Federal Reserve (Fed) grow.

Fears of a recession have intensified following recent weak economic data from the US. The Unemployment Rate has climbed to 4.3%, the highest level since November 2021, labor demand has decreased, and the Manufacturing Purchasing Managers Index (PMI) has contracted more rapidly in July. Despite these signs, the US economy has not met the technical recession criteria, as it expanded at an annualized rate of 2.8% in the second quarter, a significant improvement from the 1.4% growth rate recorded for the January-March period.

Additionally, the US Services PMI, which represents two-thirds of the economy, showed stronger expansion in July after a contraction in June. The latest PMI report revealed that service sector activities grew faster than expected, reaching 51.4, compared to a forecasted increase to 51.0 from the previous reading of 48.8.

Paraphrasing text from "FX Street" all rights reserved by the original author.