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GBP/USD suffers amid strong US Dollar, high US yields

  • GBP/USD falls over 0.40% to 1.2657, with a strong USD and high Treasury yields overshadowing Pound amid stock volatility.
  • UK deficit reduction spurs tax cut speculation; BoE may hold rates in February, possible cuts from May.
  • Traders eye S&P Global Flash PMIs in UK, US; US Q4 GDP, Core PCE price index as key upcoming events.

The GBP/USD slumped more than 0.40% in the mid-North American session amid a strong US Dollar (USD) and high US Treasury bond yields underpinning the Greenback to the detriment of the Pound Sterling (GBP). At the time of writing, the major exchanges hands at 1.2657 after hitting a daily high of 1.2747.

Cable faces pressures as markets eye US GDP figures ahead

US stocks are trading mixed as companies reveal last year’s fourth-quarter results. On the data front, the Richmond Fed Composite and Manufacturing Index deteriorated further from -11 to -15 in January, while the Services edged up from 0 to 4.

During the European session, the Office for National Statistics (ONS) in the UK revealed the budget deficit was narrower than the figures of last year, printed a £-7.77 billion in December, lower than last year’s £-13.71 billion. That could open the door for a cut in taxes, as expressed by Chancellor Hunt and UK Prime Minister Rishu Sunak in the spring budget to be presented on March 6.

Moving to central banks, the Bank of England (BoE) isn’t expected to move the needle in February according to a Reuters poll. Nevertheless, investors see Governor Bailey and Co. slashing rates as early as May, with three additional cuts, which would drag the Bank Rate from 5.25% to 4.25%.

In the US, the Federal Reserve is expected to ease policy in June, via a Reuters poll. TD Securities analysts noted, “We still expect the Committee to maintain a cautious stance in the near term even amid an increasingly improving profile for consumer prices, as the Fed would like to ascertain that the recent progress in inflation is sustainable.” The poll suggests that most analysts estimate the Federal Funds Rate (FFR) would be adjusted from 5.25%-5.50% to 4.25%-4.50%.

Ahead on the week, the UK economic docket will feature S&P Global Flash PMIs on Wednesday, as in the US as well. On Thursday, the US calendar will unveil the preliminary reading for last year’s Q4 GDP figures and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditure (PCE) price index.

GBP/USD Technical Levels

GBP/USD

Overview
Today last price1.2667
Today Daily Change-0.0042
Today Daily Change %-0.33
Today daily open1.2709
 
Trends
Daily SMA201.2714
Daily SMA501.2646
Daily SMA1001.2454
Daily SMA2001.2553
 
Levels
Previous Daily High1.2733
Previous Daily Low1.2687
Previous Weekly High1.2766
Previous Weekly Low1.2597
Previous Monthly High1.2828
Previous Monthly Low1.2501
Daily Fibonacci 38.2%1.2715
Daily Fibonacci 61.8%1.2705
Daily Pivot Point S11.2686
Daily Pivot Point S21.2663
Daily Pivot Point S31.264
Daily Pivot Point R11.2732
Daily Pivot Point R21.2756
Daily Pivot Point R31.2778

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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