GBP/USD holds to decent gains after BoE’s Bailey remarks
- GBP/USD stays in green territory, though under pressure as sentiment shifts sour.
- The US Dollar Index erases earlier gains, cushioning the Pound Sterling advance.
- BoE’s Bailey: Inflation is down due to energy prices falling; monetary and fiscal policy would do the rest of the job.
GBP/USD climbed above the 1.2600 figure during the early morning in the North American session after bouncing from daily lows of 1.2590 due to data portraying the UK economy’s resilience despite the Bank of England’s (BoE) tightening. The pair is trading at 1.2607, clinging to 0.10% gains at the time of writing.
BoE Bailey remains hawkish but risk-off mood, capped the GBP/USD rally
US equities are trading in the red amidst the market’s narrative that stocks are in overbought territory. Also, a weaker-than-expected Industrial Profits report from China weighed on market sentiment as deflationary pressures persisted.
The latest report from the US Census Bureau revealed that New Home Sales plunged in October due to high mortgage rates, as the US Federal Reserve (Fed) tightened monetary policy by 525 basis points since March 2022. Purchases dropped -5.6% YoY, missing estimates. The data failed to undermine the GBP/USD, which clings to gains due to a risk-off impulse.
Hence, the US Dollar Index, a measure of the buck’s value against a basket of six currencies paired with some of its earlier losses, is up 0.03%, at 103.44.
Meanwhile, the Bank of England Governor Andrew Bailey said getting inflation back to the 2% target will be “hard work,” acknowledging the recent fall from 6.7% to 4.6% is attributed to the drop in energy prices. Bailey emphasized they have to bring inflation down, even though it harms households; higher prices would worsen conditions.
Meanwhile, according to money market futures, the BoE is expected to cut rates by 25 bps in September of next year. Regarding the Fed, traders had fully priced in almost 85 bps of cuts in the next year.
GBP/USD Price Analysis: Technical outlook
From a technical perspective, the pair is neutral to upwards but has lost some steam. If the GBP/USD turns negative and prints a daily close below 1.2600, that would sponsor a leg-down in the major. The first support is at the November 24 daily low of 1.25223, followed by 1.2500. On the other hand, if the pair stays above 1.2600, further upside is expected. Buyers’ reclaiming 1.2700, could test the August 30 high at 1.2746.
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
