- GBP/USD pares BOE-led gains, the biggest in 3.5 months.
- Jump in UK vehicle production, fresh run-up in yields challenge BOE’s capacity to restore market confidence.
- Fears over the European energy crisis, hawkish Fedspeak add strength to the pullback moves.
- Multiple central bank speakers are up for speeches, final readings of US GDP could also help sellers.
GBP/USD takes offers to refresh the intraday low around 1.0800, snapping a two-day rebound from the record low. The cable pair consolidates the biggest daily gains since mid-June during Thursday’s Asian session.
Recovery in the US Treasury bond yields joins the market’s discomfort in the Bank of England’s (BOE) confidence to revive the British Pound (GBP) strength to weigh on the GBP/USD prices of late. On the same line could be the prevailing energy crisis in Europe and current pessimism in China.
Recently, the UK’s car production rose for the fourth straight month in August as per the Society of Motor Manufacturers and Traders (SMMT), shared via Reuters. The details suggest that almost seven in 10 SMMT members have expressed fears about future business operations.
Elsewhere, the People’s Bank of China (PBOC) is another central bank, in addition to the Bank of Japan (BOJ) and the BOE, to defend the domestic currency, namely the yuan. It’s worth noting that the PBOC has recently intervened multiple times in the market and is likely to do so today as well as to defend the yuan amid fears of economic slowdown, led by the covid-led lockdowns.
It should be noted that the British government’s rejection to fire the UK Chancellor Kwasi Kwarteng and keep his recently criticized fiscal plan in place also challenged the GBP/USD traders.
On Wednesday, the Bank of England (BOE) announced a bond-buying program to defend the British Pound (GBP). The details suggest that the BOE will buy bonds with a maturity of over 20 years and up to 5 billion sterling worth per auction initially. That said, the BOE will start buying on September 28, which suggests they postponed the pre-established mechanism of selling the bonds until October 31. BOE later confirmed that it could buy just £1.025 billion in the emergency QE operation, well below the planned £5 billion.
On the other hand, the US international trade deficit narrowed by $2.9 billion to $87.3 billion in August from $90.2 billion in July. Details suggest that the Exports dropped for the first time since January while Imports marked the fifth consecutive monthly decline. Further, Atlanta Fed President Raphael Bostic said on Wednesday that the baseline scenario right now includes a 75 basis points (bps) rate hike in November and a 50 bps increase in December, as reported by Reuters. Additionally, Chicago Federal Reserve President Charles Evans emphasized the need to address inflation and tried to renew the US dollar buying but could not due to the softer yields.
Looking forward, multiple BOE speakers are on the line, and so are the final readings of the US Q2 Gross Domestic Product (GDP), expected to confirm a 0.6% annualized figure. The GBP/USD may witness further downside if the US data prints upbeat figures and the BOE policymakers hesitate in convincing markets.
Technical analysis
GBP/USD remains bearish unless providing a clear upside break of 1.0730-35 resistance confluence, including the 10-DMA and a 12-day-old descending trend line.
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 trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.