GBP/USD snaps four-day losing streak to regain 1.2300, focus on central banks

• GBP/USD bounces off five-month low as USD bears cheer Fed’s surprise action.
• The US Federal Reserve announced rate cuts, QE.
• Global central banks unite to counter COVID-19.
• UK PM Johnson to hold a daily press conference on the outbreak.

With the Fed’s surprise action recalling the US dollar bears, GBP/USD bounces off five-month low to 1.2340, up 0.50%, while heading into the London open on Monday.

The US Federal Reserve announced a surprise rate cut to 0.25%, in addition to $700 billion worth of Quantitative Easing (QE), during the early Asian session.

Additionally, the global central bankers including the Fed, BOC, BOJ, ECB and SNB joined to lower pricing on standing US dollar liquidity swaps by 25 basis points. In doing so, central banks will offer US dollar swaps with an 84-day maturity, in addition to existing one-week operations.

While the moves were largely praised by the BOE policymakers, the UK central bank is still considered to be lagging to counter the coronavirus (COVID-19) pandemic.

To ward off the allegations, the UK PM Boris Johnson will hold daily press conferences, as per the Independent.

Over the counter, the global markets remain volatile as not only the Fed but the RBNZ also announced an unscheduled rate cut while the BOJ is in the pipeline. That said, the risk-tone remains on the back foot with the US treasury yields down nearly 30 basis points while markets in Asia also flash losses by the press time.

Although coronavirus headlines and the central bank updates will be the key to watch for near-term direction, the EU-UK disagreements over Brexit also highlight the post-departure trading terms as important to watch, if any.

Technical Analysis

200-day SMA near 1.2700 acts as the key upside barrier whereas October 2019 low near 1.2200 could offer immediate support.