- Greenback stages a comeback, boosted by higher US Treasury bond Yields
- Empire State Index surprises with 10.8 point jump in March’s report.
- GBP/USD Price Analysis: Double top emerges, but the pair must fall below 1.2344 to confirm the pattern.
GBP/USD dropped after forming a double top in recent price action during the last nine days and falls amidst speculations that the US Federal Reserve (Fed) would raise rates in May. That, alongside Fed Fund’s swaps, pushing the first rate cut by November of 2023, increased appetite for the greenback. Therefore, the GBP/USD is trading at 1.2355 after hitting a high of 1.2438.
Bets for May’s rate hike by the Fed underpins the US Dollar
US equities have turned read, while the greenback, as shown by the US Dollar Index (DXY), stages a comeback. The DXY sits at 102.214, gains 0.62%, and is one of the reasons for the GBP/USD pullback. Underpinned by traders bracing for additional tightening by the Fed, US Treasury bond yields are heading north, consequently bolstering the USD.
According to the CME FedWatch Tool, the probability of a 25 bps rate hike by the Fed stands at 84.7%, indicating an increase from last Friday’s 78%.
Earlier, a report by the New York Fed revealed that manufacturing activity in the region jumped, as shown by the Empire State Index, for March, advanced 10.8, above estimates of a -18 plunge. A rise in orders and shipments underpinned the data.
Given the backdrop, the GBP/USD retreated from daily highs at 1.2438 and extended its losses towards the S1 daily pivot at 1.2359, shy of last week’s low of 1.2344.
On the United Kingdom (UK) docket, Bank of England (BoE) Deputy Governor Jon Cunliffe crossed newswires. Cunliffe focused on digital currencies and said, “Systemic stablecoins will need to be backed with high quality and liquid assets,” and added that it would not be possible to protect stablecoin deposits in the case of failure.;
What to watch?
The UK calendar will feature the important jobs report, with Employment Change, expected at 50K and the Unemployment Rate unchanged at 3.7%. On the US front, the docket will feature Building Permits, Housing Starts, and Federal Reserve Governor Michell Bowman speaking.
GBP/USD Technical Analysis
A double-top chart pattern is beginning to emerge in the GBP/USD daily chart. Nevertheless, a break below April’s 10 cycle low at 1.2344 is needed to validate the pattern. An initial price target would be 1.2144, but the GBP/USD must hurdle some demand areas toward the latter. First, the April 3 daily low at 1.2274, followed by the 1.2200 figure, ahead of February’s 28 high, turned support at 1.2144.
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 stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.