Pound Sterling trades with caution against US Dollar ahead of key US economic data release

• The Pound Sterling struggles around 1.3450 against the US Dollar ahead of US Q2 GDP, Initial Jobless Claims and Durable Goods Orders data.
• Officials from both the Fed and the BoE have warned of upside inflation risks.
• BoE Greene expects that trade war risk has abated.

The Pound Sterling (GBP) trades cautiously around 1.3450 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair struggles to gain ground as the US Dollar demonstrates strength ahead of key United States (US) economic data releases at 12:30 GMT.

At the time of press, the US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, clings to gains near an almost two-week high of around 97.80 posted on Wednesday.

Investors will pay close attention to the US Initial Jobless Claims data for the week ending September 20 to get fresh cues on the current status of the labor market. Lately, comments from Federal Reserve (Fed) officials have signaled that they are more concerned about deteriorating job market than inflationary pressures remaining well above the central bank's target of 2%.

The US Department of Labour is expected to show that the number of individuals seeking jobless benefits for the first time rose to 235K from the prior reading of 231K. Fed dovish expectations intensified significantly in the second week of the month after Initial Jobless Claims jumped to 264K for the week ending September 6, the highest seen in four years.

In Thursday's session, investors will also focus on Durable Goods Orders data for August. Fresh orders for durable goods are estimated to have declined at a moderate pace of 0.5%. In July, Durable Goods Orders contracted by 2.8%.

Other notable releases in the US economic calendar will be the final reading of the Q2 Gross Domestic Product (GDP) and the Personal Consumption Expenditure Price Index (PCE) data.

Daily digest market movers: Pound Sterling trades calmly against its peers

• The Pound Sterling trades broadly stable against its major peers on Thursday, with investors seeking fresh cues on whether the Bank of England (BoE) will cut interest rates in the remainder of the year.
• On Wednesday, BoE Monetary Policy Committee (MPC) member Megan Greene advised caution on further interest rate cuts as risks to inflation have shifted to the upside. Greene was one of the MPC members who supported holding interest rates steady in the monetary policy meetings in September and August. Last week, the BoE held interest rates steady but reduced them by 25 basis points (bps) to 4% at the August policy meeting.
• Regarding the United Kingdom (UK) economic outlook, Greene said that "trade risks have abated", and that the central bank expect growth to "rebound", which won't lead to labor market risks materializing, Mace News reported. She added, "Firms suggest that much of the adjustment from higher insurance and minimum wage costs has already occurred."
• In last week's policy meeting, BoE Governor Andrew Bailey retained a "gradual and careful" monetary easing approach.
• Meanwhile, the US Dollar has been performing strongly as a few Federal Open Market Committee (FOMC) officials, including Chair Jerome Powell, have advised that the US central bank should exercise caution on further monetary policy expansion, citing upside inflation risks. However, none of the FOMC members have argued against further reducing interest rates.
• On Wednesday, San Francisco Federal Reserve Bank President Mary Daly also supported more interest rate cuts to support the slowing labor market. "Further policy adjustments likely will be needed, as the Fed works to restore price stability and provide needed support to the labor market," Daly said.

Technical Analysis: Pound Sterling struggles around 1.3450

The Pound Sterling seems vulnerable near 1.3450 against the US Dollar on Thursday. The GBP/USD pair trades near the lower end of a Rising Channel formation around 1.3470. The near-term trend of the GBP/USD pair remains bearish as the 20-day Exponential Moving Average (EMA) continues to act as a key barrier around 1.3514.

The 14-day Relative Strength Index (RSI) has fallen sharply below 50.00. A fresh bearish momentum would emerge if the RSI breaks below 40.00.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the July 1 high near 1.3800 will act as a key barrier.