GBP/USD weakness persists, close to 1.4000 amid a barrage of BoE dovish comments
|- Recent Bank of England's (BoE) dovish comments make market participants wonder if a rate hike is indeed around the corner.
- The GBP/USD is dropping for a fourth consecutive day now close to the 1.4000 level.
The GBP/USD is trading at around 1.4028 down 0.42% on Friday.
The GBP is under great pressure as market participants wonder if a rate hike is indeed coming in May. The latest macroeconomic data on inflation and retail sales were a miss and recent dovish comments from Mark Carney, Bank of England (BoE) Governor, exacerbated the bearish momentum on the Sterling.
Additionally, Michael Saunders from Bank of England -who is hawk- made some dovish comments “the UK rates probably need to move over time to something more neutral, but not too quickly.” which adds pressure to the British pound which is trading close to the 1.4000 handle.
On Thursday Carney said that the uncertainties related to the Brexit could delay rate hikes. The news was perceived as extremely bearish for the pound which dropped 150 pips on the news to 1.4070 back then.
Exacerbating the GBP/USD weakness is the strong US dollar which got a boost from US bond yields. As bond yields rise it increases the demand for the US dollar as more investors want to invest in bonds.
No macroeconomic data is scheduled in late Friday trading.
GBP/USD daily chart
The GBP/USD made a new 2018 high at 1.4377 on Tuesday and it was hammered lower more than 340 pips in four consecutive days of losses. The reversal was sharp and strong and sent the RSI and MACD indicators in bearish territories. The cable is currently approaching a potential support zone at the 1.4000 handle and 1.3965 swing low (April 5). The 50-period simple moving average (SMA) is located at 1.4014 which then creates a confluence zone defined between the 1.3965 (April 5 low) and the 1.4014 level (50-period SMA). Also worth noting is the ascending bullish trendline (orange line) which can also collaborate to provide some support. A break below 1.3965-1.4014 zone could open the gates to 1.3711 swing low established on March 1. Alternatively, to the upside investors can expect resistance at the 1.4245 level (March 26 high) and at the yearly high at the 1.4377 level.
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