The Pound Sterling (GBP) holds onto gains

The Pound Sterling (GBP) holds onto gains inspired by the higher risk appetite of the market participants. The GBP/USD pair remains bullish despite the Office for National Statistics (ONS) reporting that United Kingdom factory data in August contracted for the second time in a row. UK firms operated on lower capacity as they aimed to achieve efficiency by cutting higher inventory backlogs and their respective labor forces due to declining demand. A slowdown in demand and declining overall output is expected to discomfort Bank of England (BoE) policymakers, who are preparing for November’s interest rate decision. While the BoE’s Katherine Mann continued to favor further policy-tightening to bring down inflation to 2% in a timely manner, the central bank’s Swati Dhingra supported a rate cut if the growth rate fell beyond expectations.

Pound Sterling stabilized above the crucial resistance of 1.2300 as market sentiment improved. The broader risk outlook is still cautious as participation of more nations in Middle East conflicts could injure the global supply chain significantly. The Cable has climbed above the 20-day Exponential Moving Average (EMA) at 1.2280, which indicates that the short-term trend has turned bullish.