The British pound is slightly outperforming the euro and is the strongest major currency in July. GBP/USD is set to post over a 6% gain for the month.
Sterling has rallied this month even though prospects of a trade deal between Europe and the UK have declined. Earlier in the month, media outlets reported that trade talks have stalled with both parties unable to come to a compromise.
For most of the month, GBP/USD has had an unusually high correlation with the equity markets. If this correlation holds true, the pair should hold a strong tone today as positive earnings reports from several big-name tech companies have led to a sharp rally in the pre-market.
GDP data from the US released yesterday revealed a staggering 32.9% contraction in growth, attributed to the virus breakout and the subsequent lockdown measures. Analysts had called for a contraction of 34.5%, and as such, the report was not surprising and did not have a major impact on the markets.
House prices in the UK rebounded sharply in July with Nationwide reporting a seasonally adjusted increase of 1.7% following a decline of 1.6% in June. Nationwide attributed the sharp rise to pent up demand during the lockdown restrictions.
GBP/USD is attempting to close the month on a strong note. The pair trades at highs not seen since March 10.
A possible upside target for the pair falls at 1.3200. The level contained a spike high in March and has also acted as major resistance on a monthly chart since the second half of 2018.
While GBP/USD is nearing a major resistance level, the US dollar index (DXY) is also near a notable horizontal level.
The 92.50 price point in the dollar index served to hold it lower in 2006 and then higher between the middle of 2016 until the start of 2018.
The confluence of levels between these two assets could cause a pullback in GBP/USD next week. Or at the very least, offer a major hurdle over the near-term.
- GBP/USD is set to post over a 6% gain this month.
- The 1.3200 level is seen as a major obstacle for the pair.
For a look at all of today’s economic events, check out our economic calendar.