GBP/USD struggles to preserve modest intraday gains and retreats to 1.1660 mark
|- GBP/USD surrenders its modest intraday gains and retreats to the lower end of its daily range.
- A combination of factors helps the USD to pare intraday losses and exerts downward pressure.
- A bleak UK economic outlook supports prospects for a further near-term depreciating move.
The GBP/USD pair struggles to capitalize on its modest intraday uptick to the 1.1760 area and the previous YTD lows of July. After air-kissing those lows goodbye the pair appears to have retreated even further south during the early North American session. Cable is currently placed around the 1.1660 mark and remains well within the striking distance of its lowest level since March 2020, in the 1.1640s, touched the previous day.
The intraday optimism in the equity markets has run out of steam amid growing worries about a deeper global economic downturn. Apart from this, growing acceptance that the Fed will continue to tighten its monetary policy at a faster pace assists the safe-haven US dollar to recover its early lost ground. This turns out to be a key factor that attracts selling around the GBP/USD pair at higher levels.
In fact, Fed Chair Jerome Powell, during his speech at the Jackson Hole Symposium on Friday, signalled that interest rates would be kept higher for longer to bring down inflation. The markets were quick to price in a supersized 75 bps Fed rate hike move at the upcoming policy meeting in September. This helps offset a further decline in the US Treasury bond yields and acts as a tailwind for the greenback.
The British pound, on the other hand, continues to be undermined by a bleak outlook for the UK economy. It is worth recalling that the Bank of England had predicted earlier this month that the UK economy will enter a prolonged recession from Q4 of 2022. Apart the pair's conformity to a descending channel that has persisted in step-decline all year, this suggests that the path of least resistance for the GBP/USD pair is to the downside and any attempted recovery could be sold into.
Next on tap is the US economic docket, featuring the release of JOLTS Job Openings and the Conference Board's Consumer Confidence Index for the current month. This, along with the broader market risk sentiment and the US bond yields, might influence the USD and provide some impetus to the GBP/USD pair. The focus, however, remains on the US jobs report (NFP), scheduled on Friday.
Technical levels to watch
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