- Brexit optimism offset by trade tensions, stronger 10-year T-yields.
- Cable could drop to 1.2950 on upbeat US PPI data release.
- BOE’s status-quo to also add to the GBP weakness.
The GBP/USD pair keeps the offered tone intact amid widespread risk-aversion and monetary policy divergence, as we progress towards the European opening bells.
GBP/USD: Further downside likely in play
The higher-yielding pound remains exposed to the further downside below a break of the 1.3000 levels and could test the 1.2950 support, as the bears remain in control amid fresh trade tensions sparked between the US and Japan while the US-China trade dispute looms.
While the greenback continues to remain underpinned by the risk-averse market environment, stronger US jobs data reinforces Fed’s rate hike plans and brings the monetary policy divergence back in play, which is likely to weigh down on the GBP. The BOE is likely to leave the rates unchanged when it announces its monetary policy decision tomorrow.
Also, the spot could suffer amid higher Treasury yields on expectations of a faster pace of Fed tightening that will likely keep the sentiment around the US dollar buoyed. The 10-year treasury yield jumped to a five-week high of 2.98%.
In the day ahead, in absence of any UK macro news, the focus will remain on the US PPI release and Brexit-related news, especially after EU’s Barnier said that the Brexit deal is realistic within the next 8 weeks.
GBP/USD Technical Levels
“According to readings in the 4 hours chart, as it met buyers on a dip toward a bullish 20 SMA, which continues advancing above the 200 EMA. In the same chart, technical indicators have bounced from their midlines, although the upward momentum is limited and indicators stand well below their daily highs. Support levels: 1.2985 1.2940 1.2890. Resistance levels: 1.3050 1.3095 1.3130,” FXStreet’s Chief Analyst Valeria Bednarik noted.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.