The Pound US Dollar exchange rate held near $1.3352 on Monday, virtually unchanged, as easing UK political worries and renewed dip-buying in the US Dollar cancelled each other out. Neither an in-line ISM services reading nor fading fears over the Labour leadership contest gave the pair a clear direction.
The Pound US Dollar (GBP/USD) exchange rate traded at $1.3352 on Monday, virtually unchanged on the day, as two opposing forces left the pairing without a clear direction. Easing UK political concerns supported the Pound, while renewed dip-buying in the US Dollar pulled the other way.
US Dollar claws back losses
The US Dollar found some support on Monday as US markets reopened after the extended Independence Day break. The currency appeared to have drifted into oversold territory following last week's sharp selloff, which came after the latest non-farm payrolls report revealed a much steeper-than-expected slowdown in job creation. This encouraged some bargain hunters back in, allowing the Dollar to recoup a portion of its recent losses.
The day's data reinforced the picture of a still-solid US economy. The ISM services PMI slipped from 54.5 in May to 54 in June, matching forecasts. The reading pointed to a modest loss of momentum but remained comfortably in expansion territory, suggesting the services sector was still performing relatively well.
Political risk premium fades from Sterling
The Pound stayed resilient as investors continued to unwind some of the political risk premium that had recently weighed on Sterling. Markets appear increasingly convinced that MP Andy Burnham will become the next Prime Minister without a prolonged Labour leadership contest adding further uncertainty.
Since announcing his bid for the Labour leadership, Burnham has pledged to stick to the government's current fiscal rules while setting out an ambitious economic agenda. That has helped reassure Pound investors as fears over UK political instability continue to fade.
What could move the pair next
Tuesday's data calendar looks relatively quiet, with the US weekly ADP employment change figure the only notable release. Although not a top-tier indicator, it could still lend the Dollar some support if it points to solid growth in private-sector hiring.
Broader sentiment may matter more. A weaker appetite for risk could favour the safe-haven US Dollar, while a brighter mood may help the increasingly risk-sensitive Pound. For traders weighing how to approach the pair, any shift in risk appetite could leave GBP/USD trading unevenly.
Source: CurrencyNews.co.uk
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