GBPUSD Analysis 19-July-2024

The British pound stayed near $1.29 (GBP/USD pair), a high not seen in almost a year, as traders changed their expectations for an interest rate cut by the Bank of England in August after seeing the latest economic figures. In June, the inflation rate remained steady at 2%, higher than the predicted slowdown to 1.9%.

GBPUSD Analysis 19-July-2024

Additionally, services inflation stayed at 5.7%, above the Bank of England’s forecast of 5.1%. This caused the likelihood of an interest rate cut in August to drop to about 33%, down from nearly 49% before the inflation data was released.

In other economic news, wage growth slowed to 5.7%, the lowest since 2022 but still considered high. The unemployment rate remained at 4.4%, matching the high levels in 2021. Last week, the Bank of England’s Chief Economist, Huw Pill, pointed out that services price inflation and wage growth are still strong.

For those unfamiliar with these terms, inflation is the rate at which the prices of goods and services rise, which reduces purchasing power over time. A steady inflation rate can indicate a stable economy, but if it stays high, it can increase consumer and business costs.

Interest rates, controlled by central banks like the Bank of England, are used to help control inflation. When rates are high, borrowing money becomes more expensive, which can slow down spending and help lower inflation. Conversely, lower interest rates make borrowing cheaper, boosting spending and economic growth.

Understanding these economic indicators is important as they affect everyday expenses, job markets, and the economy’s overall health.