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preface
Hey friends! Recently, there have been some small waves in the financial markets, especially the pound against the dollar, which has been falling for three consecutive weeks. Don't worry, though, this is actually an expected adjustment. Today we are going to talk about the movement of the pound and what is behind it. Also, there is a new move on the Fed's side, and they may cut rates sooner than expected. Alright, let's get started!
Let's start with the pound. It is true that the pound has fallen for three consecutive weeks recently, but on the whole, its trend is relatively stable. Analysts believe that from a technical point of view, GBP/USD is already somewhat overbought, that is, it has risen a little sharply before, and now it is normal to pull back. The market did see this, and the GBPUSD fell all the way from above 1.30 to 1.2707, which was also the lowest point of last Friday.
The question now is that if the next actions of the Bank of United Kingdom do not give a positive signal to the market, the pound may continue to test the key support level of 1.2707 again. The price of 1.2707 is quite important, as it represents the 78.6% Fibonacci retracement of the pound's rebound in June-July. To put it simply, a break below this level could mean that the pound's decline will continue for some time.
On August 6, 2024, the central parity of the USD/RMB exchange rate in the interbank foreign exchange market was 1 US dollar to 7.1318 yuan. According to today's latest exchange rate, 1 US dollar can be exchanged for 7.1542 yuan. Today's opening price is 7.1560 yuan, compared to yesterday's close of 7.1395 yuan, indicating that the exchange rate of the US dollar against the yuan has increased in the short term. Yesterday's high was $7.1685 and the lowest price was $7.1508, indicating that the demand for the US dollar has increased amid volatility. Changes in the US dollar exchange rate are usually closely related to United States economic data, monetary policy, and risk sentiment in international markets.
Let's look at United States on the other side. Recent United States employment data has been less than ideal, with the unemployment rate rising to 4.3% in July and only 114,000 new nonfarm payrolls, well below the 179,000 in June and below market expectations of 176,000. This has led to concerns that the growth momentum of the United States economy may be slowing. As a result, investors began to ramp up bets that the Fed may need to cut interest rates to stimulate the economy, and that the rate cut could be larger than previously expected.
Money markets are now pricing in a 100 basis point rate cut by the Fed in 2024. Economists are more aggressive, arguing that the Fed could cut rates by 50 basis points in September, or even rush to act between meetings. In this case, there is both a smell of panic and a feeling that the Fed may have made a mistake in keeping interest rates high.
Let's move on. Having said that, the fall of the pound against the dollar is actually related to the dynamics on the side of United States. If the Fed does cut interest rates, then the attractiveness of the dollar may decrease, which is actually good news for the pound. However, the challenge for the pound in the short term is quite large, especially if the United Kingdom Bank does not take corresponding measures to boost market confidence.
On August 6, 2024, the central parity of the GBP/RMB exchange rate in the interbank foreign exchange market was 1 GBP to 9.1201 RMB. According to today's latest exchange rate, 1 British pound can be exchanged for 9.1462 yuan. Today's opening price was 9.1155 yuan, compared to yesterday's close of 9.1080 yuan, indicating that the GBP/CNY exchange rate has increased in the short term. Yesterday's high was $9.1484 and the low was $9.1155, indicating that the demand for the pound has increased amid volatility. Changes in the pound exchange rate are usually closely related to United Kingdom economic data, the monetary policy of the United Kingdom Central Bank, and risk sentiment in international markets.
For investors, the biggest concern now is what the Fed will do next. After all, the Fed's policy adjustments can have a significant impact on global financial markets. If the Fed does decide to cut interest rates aggressively, then the dollar could come under pressure, which in turn will reduce the pressure on the pound. However, it also depends on how the United Kingdom's own economy performs, and if the United Kingdom economic data is poor, the pound may still come under pressure.
Now, let's take a look at how likely it is that the Fed will cut interest rates. First, judging by the employment data, the United States economy is indeed showing signs of slowing. In this case, it makes sense for the Fed to cut interest rates to stimulate the economy. However, the Fed's decision-making depends not only on employment data, but also on factors such as inflation and consumer confidence. If these data remain strong, then the Fed may not rush into action.
On the other hand, the Fed may also take into account global economic uncertainties, such as the progress of United Kingdom's Brexit, Sino-US trade relations, etc. These factors may also prompt the Fed to adopt a more accommodative monetary policy. Of course, the Fed's decision-making is very complex and requires a combination of factors.
For investors, in the face of such a market environment, the most important thing is to stay calm and at the same time do a good job of risk management. If the pound does fall again, it could be a challenge for those who hold GBP assets. But on the other hand, it could also be a good time to buy the bottom. In conclusion, it is important to be flexible and patient during these uncertain times.
On August 6, 2024, the central parity of the Canada dollar to RMB exchange rate in the interbank foreign exchange market was 1 Canada to 5.1658 yuan. Based on today's latest exchange rate, 1 Canada dollar can be exchanged to 5.1804 yuan. Today's opening price was $5.1630, compared to yesterday's close of $5.1571, indicating that the Canadian dollar has risen against the yuan in the short term. Yesterday's high was $5.1817 and the low was $5.1630, indicating that the demand for the Canadian dollar has increased amid volatility. Changes in the Canadian dollar exchange rate are often closely related to Canada's economic data, central bank monetary policy, and risk sentiment in international markets. In the near term, Canada's economic recovery and volatility in commodity prices may affect investor confidence in the Canadian dollar.
epilogue
Well, that's all for today's sharing. The direction of the pound against the dollar, as well as the possible action of the Federal Reserve to cut interest rates, are the focus of financial markets at the moment. For us ordinary investors, understanding these trends can help us make more informed investment decisions. Hopefully, today's analysis will shed some light on you. See you next time!
We hope you find this article useful, and if you have any questions or want to discuss with you, please feel free to do so. Dandan wishes you all good health and smooth investment! Thank you for reading, and I wish you a happy mood when you see this, smooth sailing, smooth sailing, and a lot of money! Don't forget to like and follow, and we'll see you in the comment area!