GBP/USD recovers further from all-time low and climbs to 1.0700, not out of the woods yet
|- GBP/USD stages a goodish intraday bounce from an all-time low touched earlier this Monday.
- Speculations for BoE intervention offer support to sterling and prompt intraday short-covering.
- A modest USD profit-taking slide from a fresh two-decade high contributes to the momentum.
- A combination of factors should keep a lid on any meaningful upside for the pair, at least for now.
The GBP/USD pair manages to recover a major part of its early lost ground to an all-time low and moves back to the 1.0700 mark during the first half of the European session. The attempted recovery, however, lacks follow-through buying and runs the risk of fizzling out rather quickly.
Speculations that the Bank of England will have to step in to stabilise the domestic currency helped the British pound to stall its free-fall following the new UK government's mini-budget on Friday. This, in turn, is leadsing to an intraday US dollar profit-taking slide from a fresh two-decade high, which further contributes to the GBP/USD pair's intraday recovery of over 400 pips from the 1.0330 area.
That said, a more hawkish stance adopted by the Fed, along with a further rise in the US Treasury bond yields and the prevalent risk-off mood, should help limit any meaningful USD corrective slide. In fact, the Fed last week delivered another supersized rate hike and signalled that it will likely undertake more aggressive increases at its upcoming meetings to combat stubbornly high inflation.
This, in turn, pushes the yield on the rate-sensitive 2-year US government bond to a 15-year peak and the benchmark 10-year Treasury note to its highest level in 11 years. Meanwhile, the rapidly rising borrowing costs, along with the risk of a further escalation in the Russia-Ukraine conflict, have been fueling concerns about a deeper global economic downturn and weighing on investors' sentiment.
The anti-risk flow is evident from a generally weaker tone around the equity markets, which could lend some support to the safe-haven greenback. Furthermore, the lack of confidence in the government’s ability to manage the ballooning debt might continue to act as a headwind for sterling. This, in turn, should keep a lid on any meaningful upside for the GBP/USD pair, at least for now.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.