GBP/USD hangs near multi-month low, seems vulnerable below 1.2400 ahead of UK/US PMIs


Share:
  • GBP/USD remains on the defensive and is pressured by a combination of factors.
  • The Fed's hawkish outlook and a weaker risk tone underpin the safe-haven USD.
  • The BoE's surprise pause continues to weigh on the GBP and favours bearish traders.

The GBP/USD pair struggles to capitalize on the previous day's modest bounce from the 1.2230 area or a nearly six-month low and oscillates in a narrow trading band during the Asian session on Friday. Spot prices remain below the 1.2300 round-figure mark and seem vulnerable to prolonging a well-established downtrend witnessed over the past two months or so.

The US Dollar (USD) holds steady just below its highest level since June touched on Thursday and continues to draw support from the Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen acting as a headwind for the GBP/USD pair. The Fed decided to keep rates unchanged at a 22-year high, between the 5.25%-5.50% range, as was widely expected, though signalled the possibility of at least one more rate hike by the end of this year in the wake of sticky inflation.

Furthermore, the so-called 'dot-lot' indicated that policymakers see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four projected previously. This, along with an unexpected drop in the US Weekly Jobless Claims, pushed the yield on the rate-sensitive two-year US government bond to a fresh 17-year peak. Moreover, the 10-year US Treasury yield climbs to the highest since November 2007 and underpins the Greenback.

A sharp rise in the US Treasury bond yields, meanwhile, fuels concerns about economic headwinds stemming from rapidly rising borrowing costs and tempers investors' appetite for riskier assets. This leads to a further decline in the equity markets, which is seen as another factor underpinning the safe-haven buck and exerting some pressure on the GBP/USD pair. The British Pound is further weighed down by the Bank of England's (BoE) surprise pause on Thursday.

In fact, the UK central bank decided to leave the benchmark interest rate steady at 5.25%, defying expectations of a 25 bps hike to 5.50% in the wake of the recent deceleration of inflation, signs that the UK labour market is cooling and reviving recession fears. Nevertheless, it was the first time since December 2021 that the BoE did not raise interest rates and also lowered its forecast for economic growth in the July-September period to just 0.1% from the previous projection of 0.4%.

The aforementioned fundamental backdrop seems tilted in favour of bearish traders and suggests that the path of least resistance for the GBP/USD pair is to the downside. Hence, any attempted recovery could be seen as a selling opportunity and remain capped. Traders now look to the release of the flash PMI prints from the UK and the US for some meaningful impetus on the last day of the week. Spot prices, meanwhile, seem poised to end in the red for the third straight week.

Technical levels to watch

GBP/USD

Overview
Today last price 1.2286
Today Daily Change -0.0012
Today Daily Change % -0.10
Today daily open 1.2298
 
Trends
Daily SMA20 1.2507
Daily SMA50 1.2683
Daily SMA100 1.2647
Daily SMA200 1.2434
 
Levels
Previous Daily High 1.2352
Previous Daily Low 1.2235
Previous Weekly High 1.2548
Previous Weekly Low 1.2379
Previous Monthly High 1.2841
Previous Monthly Low 1.2548
Daily Fibonacci 38.2% 1.228
Daily Fibonacci 61.8% 1.2307
Daily Pivot Point S1 1.2238
Daily Pivot Point S2 1.2179
Daily Pivot Point S3 1.2122
Daily Pivot Point R1 1.2355
Daily Pivot Point R2 1.2411
Daily Pivot Point R3 1.2471

 

 

Share: Feed news

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.

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content


Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content

Editors’ Picks

EUR/USD holds steady near 1.0800 ahead of Fed Minutes

EUR/USD holds steady near 1.0800 ahead of Fed Minutes

EUR/USD fluctuates in a narrow channel at around 1.0800 in the European trading hours on Wednesday after closing the fifth consecutive day in positive territory on Tuesday. The US Dollar stays resilient against its rivals and limits the pair's upside FOMC Minutes.

EUR/USD News

GBP/USD consolidates gains above 1.2600

GBP/USD consolidates gains above 1.2600

GBP/USD consolidates Tuesday's gains and trades above 1.2600 in the European session on Wednesday. The pair struggles to gain traction amid a resurgent US Dollar demand as risk sentiment turns sour. The focus now shifts to the Fed Minutes, BoE- and Fed-speak.

GBP/USD News

Gold stabilizes near $2,030, eyes on FOMC Minutes

Gold stabilizes near $2,030, eyes on FOMC Minutes

Gold clings to marginal daily gains at around $2,030 on Wednesday after closing the first two days of the week in positive territory. The benchmark 10-year US Treasury bond yield edges lower ahead of FOMC Minutes, helping XAU/USD hold its ground.

Gold News

Bitcoin is 23% away from ATHs, but retail is still not here, why?

Bitcoin is 23% away from ATHs, but retail is still not here, why?

Bitcoin’s journey so far has been nothing short of shocking. From ETF approval to countries warming up to crypto regulation, the crypto landscape seems to have changed quite a bit.

Read more

Fed Minutes Preview: Markets to scrutinize comments over timing of interest-rate cuts

Fed Minutes Preview: Markets to scrutinize comments over timing of interest-rate cuts

The Federal Reserve (Fed) will release the minutes of the January policy meeting on Wednesday. Investors will pay close attention to comments regarding the inflation outlook and the possible timing of a policy pivot.

Read more

Forex MAJORS

Cryptocurrencies

Signatures