GBP/USD rises to one-month highs above 1.2150 as DXY tumbles
|- US yields fall dramatically pushing DXY to the downside.
- Markets attempt to stabilize amid market jitters.
- GBP/USD up for the fourth day in a row, looking at 1.2200.
The GBP/USD broke above 1.2150, reaching the highest level since mid-February, boosted by a sharp decline of the US Dollar Index (DXY). A sharp drop in US yields occurs as investors shift their bets for a softer Federal Reserve, amid market concerns about the banking industry.
DXY slumps on a new scenario
The collapse of Silicon Valley Bank and its effect are driving markets. Major US indices are mixed on Monday, with the banking sector falling sharply. The Dow Jones is at four-month lows levels.
The ongoing situation has diminished the odds of a 50 basis points rate hike from the Federal Reserve next week and sent US yields sharply to the downside. On Tuesday, the US will release February’s Consumer Price Index, a key input, now being offset by recent developments. Before the SVB collapse, larger-than-expected inflation numbers would have cemented exceptions for a 50bps rate hike, but the case now is more complex with market participants projecting a softer Fed.
US yields are falling sharply at a speed not seen in years. The US 10-year was above 4% last week and on Monday bottomed at 3.42%. The slide in yields has weakened the US Dollar against it main European competitors. The DXY is down by almost 1% at the lowest in four weeks.
The ramifications of the banking crisis in the US crossed the Atlantic. In the UK, the government and the Bank of England facilitated a deal for HSBC o buy Silicon Valley Bank UK for 1 pound. On Tuesday, before US CPI, the UK will release employment numbers.
The GBP/USD is trading at monthly highs at 1.2176, with a strong bullish momentum. On the upside, the next strong resistance area is seen at 1.2200. The pair is retaking the 20-day Simple Moving Average (SMA). The 1.2100 zone and 1.2060 have become relevant support levels.
GBP/USD daily chart
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.