GBP/USD ignores UK PM Truss’ push for prosperity below 1.1400, focus on central banks, politics
- GBP/USD remains pressured around multi-year low as traders brace for FOMC.
- UK PM Truss unveiled policies to achieve higher growth, stamp duty cut gains a major attention.
- US-UK talks appear ‘uninteresting’ amid no trade deal prospects, Brexit talks appear lucrative.
- Fed’s 0.75% rate hike, fresh economic projections and Chairman Powell’s speech will be crucial.
GBP/USD holds lower ground near the 37-year bottom, close to 1.1375, as market braces for the US Federal Reserve’s (Fed) monetary policy announcement during early Wednesday in Asia. In doing so, the Cable pair ignores recently positive updates from the UK’s political frontier, as well as Brexit, amid fears that the divergence between the Fed and the Bank of England (BOE) is likely to remain wider.
UK PM Lizz Truss unveiled a slew of policy measures, including a cut in the stamp duty as she pushes for ‘prosperity’, per The Times. UK PM Truss says, per The Guardian, “Chancellor will explain how tax cuts will be paid for on Friday.”
It should be noted that UK PM Truss also rejected the chatters that her policies would encourage the Bank of England to raise interest rates, reported The Guardian. This is something which might have exerted more downside pressure on the GBP/USD prices ahead of the BOE meeting, up for publishing on Thursday.
Elsewhere, UK PM Truss and US President Joe Biden will have a bilateral meeting on Wednesday but the former has already turned down any scope for a trade deal with the US, which in turn pours cold water on the face of the GBP/USD optimists.
Alternatively, expectations that the UK and Northern Ireland (NI) will fasten Brexit process, even at the cost of more aggressive measures, seemed to be a positive catalyst for the Cable pair. On the same line are the hawkish hopes from the “Old Lady”, as the BOE is popularly known.
The chatters that the US Federal Reserve (Fed) may surprise markets by a 1.0% rate hike, per the latest talks from global economist Nouriel Roubini, also weighed on the risk-off mood and the GBP/USD prices.
It should be noted that the nine-month downtrend in the US NAHB Housing Market Index precedes the Building Permits to 1.517M in August versus 1.61M forecast and 1.685M prior. However, Housing Starts improved to 1.575M compared to 1.445M market consensus and 1.404M previous readings.
Against this backdrop, US 10-year Treasury yields rose to the highest level since February 2011, around 3.567% by the press time, whereas Wall Street closed in the red.
Looking forward, the Biden-Truss meeting and the UK’s political/Brexit updates may entertain traders ahead of the Fed’s announcements. While the 0.75% rate hike is already given, any surprises will be taken seriously and can move the GBP/USD prices.
Also read: Fed September Preview: Terminal rate projection is key
Technical analysis
A three-month-old support line, near 1.1330 by the press time, keeps offering bounce to the GBP/USD pair. The recovery moves, however, remains capped by the 5-DMA hurdle, around 1.1415 at the latest.
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.
