GBP/USD returns to daily lows near 1.3020 as DXY pushes above 95
|- BoE MPC votes unanimously for a 25 bps rate hike.
- Governor Carney's comments weigh on GBP on Thursday.
- US Dollar Index gains traction and, once again, tests 95 handle.
Following the initial bullish reaction to the BoE's interest rate decision, the GBP/USD made a sharp U-turn during governor Mark Carney's press conference and lost nearly 100 pips from its session high. Although it looked like the pair was trying to recover its losses as it rose toward mid-1.30s, a strengthening greenback made sure that the pair remained under pressure. As of writing, the pair was down 0.77%, or 100 pips, at 1.3025.
Although a rate hike from the BoE was already priced in the markets, the fact that the MPC voted unanimously provided a boost to the sterling. However, governor Carney's comments made it clear that the Bank would remain on hold amid the uncertainties surrounding Brexit negotiations and weighed on the GBP. In an interview with BBC, Carney said that one rate hike for the next few years could be a "good rule of thumb." Reflecting the broad-based GBP weakness, the EUR/GBP broke above the 0.89 mark.
Commenting on Carney's remarks, "the MPC has taken a leap of faith to protect its forward guidance and maintain its credibility, but Brexit is a big, big question mark that hovers over the economy. We don’t expect another hike until it becomes clear what kind of Brexit the economy has to endure," Rabobank analysts noted.
On the other hand, today's upbeat macroeconomic data releases from the U.S. helped the greenback preserve its bullish momentum and put some extra weight on the pair. In the last hour, the DXY broke above the 95 mark and a daily close there could suggest that the index is getting ready to extend higher.
On Friday, the only macroeconomic data release from the UK will be the Markit's Services PMI, which is unlikely to help the pound shake of the bearish pressure. In the second half of the day, investors will be focused on the NFP report.
Technical outlook
With a decisive break below 1.3000 (psychological level), the pair could edge lower toward 1.2955 (Jul. 19 low) and 1.2900 (Sep. 1, 2017, low). On the upside, resistances align at 1.3135 (20-DMA), 1.3210 (50-DMA) and 1.3290 (Jul. 16 high).
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.