British Pound: Downside risk versus US Dollar below 200-DMA – Societe Generale

FXStreet Insights Team FXStreet

Societe Generale economists argue that the British Pound (GBP) and Gilts face a pivotal period as the Bank of England (BoE) reacts to persistent inflation and wage pressures, which have slowed the pace of rate cuts and hurt long-end Gilts. They highlight that GBP/USD has pulled back after failing near 1.3660 and slipping below the 200‑DMA, with the moving average around 1.3430 now a key hurdle and warn that inability to clear this level could extend downside towards the March low at 1.3220/1.3150, with a break below opening a deeper downtrend. Intraday, support is seen at 1.3220 and resistance at 1.3430.

Sterling pressured by technical barriers

"For sterling and Gilts, a pivotal week could lie ahead for the BoE and the future of the Starmer government. Inflation and fears of second round effects tied to wages have forced the BoE to go slow on lowering rates and have dented the appeal of Gilts in the long end. There is a non-negligible possibility that chief economist Pill is joined by other MPC members voting for a rate hike at the next meetings if core CPI comes in hot on Wednesday."

"There could be relief if inflation comes down in April. SG economics forecast a dip in headline to 3.0% yoy and core to 2.6% yoy, in line with consensus. Private sector wages are forecast to rise 3.1% yoy for the 3-month period ending March. Gilts have not been aided by the political storm engulfing the Labour cabinet and a possible swing to the Left."

"Former Health Secretary Streeting announced his intention to challenge PM Starmer. The return of Burnham to Westminster is not without complications, requiring victory over Reform and the Greens in the Makerfield by-election (likely 18th June). Both Streeting and Burnham want Britain to rejoin the EU but Makerfield voted in favour of leaving in 2016."

"GBP/USD has staged a steady pullback after encountering strong resistance near 1.3660 earlier this month. The pair has fallen below the 200- DMA, highlighting a lack of steady upward momentum."

"The moving average, currently around 1.3430, may act as a short-term hurdle. An inability to overcome this resistance could result in continued downside. The March low near 1.3220/1.3150 is next support zone. A break below this may lead to a deeper extension of the downtrend."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.