GBP/USD bears flirt with 1.0500 as the slump to record low trigger BOE intervention hopes
|- GBP/USD remains mostly inactive after declining to the all-time low.
- Doubts over UK’s fiscal stimulus to generate economic benefits, Russia-Ukraine woes led the bears.
- Hawkish Fedspeak, firmer US data also exerted downside pressure on the cable pair.
- Buyers could cheer BOE’s abrupt rate hike or bond-linked moves, if announced, at the record low.
GBP/USD resists extending downside at the record low near 1.0340, inactive around 1.0490 during early Monday morning in Europe. In doing so, the Cable pair sellers remain cautious amid hopes of the Bank of England’s (BOE) intervention after the markets punished the British fiscal.
Speculations that Liz Truss led the British government's economic plan will stretch the nation’s finances to the limit triggered the Cable pair’s slump to the record low earlier in the day. The pair’s slump joined other risk-negative catalysts and hawkish Fedspeak to propel the US Dollar Index (DXY), as well as weigh on the GBP/USD prices.
UK Finance Minister, also known as Chancellor, Kwasi Kwarteng announced record tax cuts funded by huge increases in British borrowing on Friday. During the weekend, Reuters reported that Keir Starmer, leader of Britain's Labour Party, pledged to reverse the abolition of the top rate of income tax, saying tax cuts for the wealthy wouldn't create economic growth as he made a pitch for power at his party's annual conference. Also weighed on the GBP/USD could be UK Chancellor Kwarteng’s resistance to blaming BOE Governor Andrew Bailey for the recent jump in inflation and economic fears for Britain.
Elsewhere, Friday’s first readings of the US S&P Global PMIs for September raised concerns about the firmer rate hikes by the US Federal Reserve (Fed) as the numbers were upbeat, as compared to softer figures for Europe. Following the data, Fed Chairman Jerome Powell, Vice Chair Lael Brainard and Atlanta Fed President Raphael Bostic all were mostly bullish and in favor of further rate hikes.
It’s worth noting that the global ire towards Russia’s plan to deploy more troops around Ukraine also exerted downside pressure on the GBP/USD prices, via the US dollar strength.
Amid these plays, S&P 500 Futures drop half a percent while the US 10-year Treasury yields add four basis points to 3.74% at the latest.
Looking forward, all eyes will be on the UK’s market open as the BOE is expected to respond to the GBP/USD slump. In absence of this, the quote won’t hesitate to refresh the all-time low.
Technical analysis
Despite the latest corrective bounce, mainly due to the oversold RSI, the GBP/USD bears keep reins unless the pair bounces back beyond the year 2020 low near 1.1410.
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