GBP/USD: Cable sellers ignore hawkish BoE’s Bailey to approach 1.2600 as Fed Chair Powell’s speech loom
- GBP/USD remains pressured at the lowest level in a fortnight, poking five-week-old rising support.
- BoE’s Bailey defends hawkish bias, tames UK recession woes but Pound Sterling stays bearish.
- Comparatively stronger Fed rate hike signals than BoE, upbeat US data weigh on pair prices.
- Fed Chair Jerome Powell’s speech, second-tier US data eyed for clear directions.
GBP/USD drills the 15-day low around 1.2620 heading into Thursday’s London open. In doing so, the Cable pair traders pay little reaction to comments from Bank of England (BoE) Governor Andrew Bailey than Federal Reserve (Fed) Chairman Jerome Powell.
The reason for more preference for Fed Chair Powell’s speech as the key catalyst could be linked to the comparatively stronger economic conditions in the UK than in the US. Additionally, the upbeat outcome of the US Banking Stress Test also emphasizes the US Dollar strength.
That said, Bank of England (BoE) Govern Andrew Bailey showed readiness to do what was necessary to get inflation to target. The policymaker also said, “Data showed clear signs of persistence of inflation," suggesting further rate hikes from the “Old Lady”, as the BoE is informally called.
On the other hand, Federal Reserve (Fed) Chairman Jerome Powell said, “We believe there's more restriction coming, driven by the labor market.” The policymaker also ruled out the economic downturn as the most likely case.
Elsewhere, the Fed's ‘stress test’ exercise showed lenders, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley and Goldman Sachs, have enough capital to weather a severe economic slump, paving the way for them to issue share buybacks and dividends,” reported Reuters.
It should be noted that the mixed headlines about the US-China ties as US Treasury Secretary Janet Yellen ‘hopes’ to visit China to re-establish contacts but also showed readiness to take actions to protect national security interests even at economic cost add strength to the US Dollar and weigh on the USD Dollar, via challenges to sentiment.
Amid these plays, S&P500 Futures lack clear directions after rising in the last two days. Further, the US 10-year and two-year Treasury bond yields consolidate the previous day’s losses around 3.48% and 4.75% at the latest.
Looking forward, Fed Chair Powell’s speech and the revised version of the US Gross Domestic Product (GDP) for the first quarter (Q1) 2023, as well as the second-tier US employment and activity data, will be important to watch for clear directions.
Technical analysis
Daily closing beyond a five-week-old rising support line, around 1.2620, as well as a clear downside break of the 1.2600 round figure becomes necessary for the GBP/USD bears to keep the reins.
On the contrary, the Cable pair’s recovery needs validation from 21-day Exponential Moving Average (EMA), close to 1.2645 by the press time.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
