GBP/USD: Brexit to send the pound lower

FXStreet Team FXStreet

Coronavirus may be a double-edged sword for GBP/USD bulls – while it rides higher on expectations for the Fed to cut rates, it has room to fall as the disease hits closer to home. And there's always Brexit, Yohay Elam from FXStreet reports.

Key quotes

“Investors are flocking to the safety of American debt markets. The growing odds that the Federal Reserve cuts rates are weighing heavily on the dollar.”

“In the UK, authorities have confirmed a total of 19 people infected – including two potentially from London, according to the Daily Telegraph. The spread of the illness to one of the world's financial capitals could wreak havoc. That is one of the reasons that coronavirus may eventually hit the pound.”

“Mark Carney, the outgoing Governor of the Bank of England, has said that the institution will likely need o to downgrade its growth forecasts. His words may lay the ground for a rate cut in the UK – a decision left to Andrew Bailey, his successor. That curbs any sterling gains.”

“UK Prime Minister Boris Johnson and his government adopted a tough stance ahead of talks with the EU on post-Brexit arrangements, due on Monday. Britain may walk out of talks if not enough progress is made by June.”

Author

FXStreet Team

FXStreet

Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

GBP/USD strengthens to near 1.3400 as UK political risk fades

The GBP/USD pair gathers strength near 1.3395 during the Asian trading hours on Thursday, bolstered by fading domestic political uncertainty. However, hawkish minutes from the Federal Reserve and renewed tensions between the US and Iran might support the US Dollar and cap the upside for the major pair.

EUR/USD sticks to positive bias above 1.1400 vs USD; Mideast tensions cap gains

The EUR/USD pair attracts some buyers for the second straight day, though it lacks follow-through and remains confined within the previous day's range during the Asian session on Thursday. Spot prices currently trade around the 1.1420 area, up less than 0.10% for the day, and remain at the mercy of the US Dollar price dynamics.

Gold keeps the red despite softer USD; stays below $4,100

Gold trades with a mild negative bias in the Asian session on Thursday, fading the overnight bounce from $4,020, or a one-week low. Minutes of the June FOMC meeting showed an evenly divided debate over the monetary policy outlook and failed to impress the US Dollar bulls, which is supporting Gold. However, fresh US-Iran tensions drive Oil higher, reviving inflation concerns and limiting the USD's downside and the bullion's rebound.

Bitcoin has yet to escape bearish conditions despite recent recovery

In a report on Wednesday, Glassnode stated that Bitcoin has continued trading beneath both the True Market Mean of $76,600 and the short-term holders cost basis of $72,200. "Until these levels are reclaimed, the market remains in deep value territory and structurally vulnerable to any external negative catalyst," Glassnode wrote.

2.50%: Why the Kiwi's first hike in three years is a wager on a number nobody can see

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at 02:00 GMT on Wednesday, its first hike in three years and the moment the bank that cut deeper than any G10 peer last cycle turned to face the other way.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.