Jakarta, GIC Trade – The pound sterling remains under pressure amid a cautious atmosphere, struggling to rise around 1.28000 during Tuesday's trading session.
 
The pressure on the pound sterling arises from the UK's patchy economic recovery as companies face the burden of higher interest rates. The Bank of England (BoE) cannot halt interest rate hikes due to inflation in the UK being significantly above desired levels.
 
The pound (GBP) rebounded after losing downward momentum as market participants digested bleak economic prospects driven by higher inflation and the Bank of England's aggressive monetary policy.
 
The GBP/USD Forex pair gained demand as market sentiment turned bullish amid hopes that interest rates by global central banks will peak sooner than expected.
 
UK factory activity stalled in July as companies delayed credit demand to avoid higher interest obligations. In addition to expensive borrowing rates, demand for costly goods has slowed as many households struggle to buy essential items.
 
Meanwhile, housing demand is also facing increased pressure as individuals hold back from borrowing to avoid higher mortgage rates.
 
S&P Global reported on Monday that UK factory activity contracted to 45.0 in early July, missing the forecast of 46.1 and down from 46.5 seen in June, marking the twelfth consecutive contraction in the manufacturing sector. A PMI figure below 50.0 indicates contraction, while above 50 indicates expansion.
 
Furthermore, early services PMI in the UK dropped to 51.5 from both the consensus and the previous release of 53.0 and 53.7, respectively. The early July PMI is the weakest since January, adding evidence of high inflation pressures and higher interest rates from the Bank of England.
 
The bleak economic outlook has reinforced expectations of a UK economic recession. Uncertainty about UK inflation persists as resilient consumer spending could offset the recent slowdown in inflation. The BoE's aggressive tightening policy is putting pressure on first-time homebuyers.
 
Fundamentally, further hikes in the Bank of England's benchmark interest rate amid high inflation weigh on the manufacturing and credit sectors, placing additional pressure on the pound sterling. Now, let’s look at the technical analysis:
 
Technical Analysis



The GBP/USD pair on the 1-hour timeframe is attempting to move higher, touching resistance at 1.28770 and heading toward the next resistance level at 1.29230. The upward trend is also confirmed by the FXBot template, where the GBP figure is higher at 4.0 compared to the USD at 3.4. Meanwhile, the bullish bias is supported by buy signals indicated by a green arrow.
 
This analysis reflects fundamental and technical perspectives used by the author and is not intended as advice or solicitation. For more information, click the image below.