- GBP/USD remains on the back foot around intraday low, keeps previous day’s pullback from three-week top.
- UK’s Truss, EU’s Sefcovic to discuss Brexit, chatters over UK’s new offer on Northern Ireland keep pair buyers hopeful.
- UK PM Johnson battles ‘Partygate’ problems, Britain eases more activity restrictions.
- Preliminary readings of UK Q4 GDP, US Michigan Consumer Sentiment Index for February will be crucial.
GBP/USD pares intraday losses around 1.3550 but keeps the previous day’s pullback from a multi-day high during Friday’s Asian session.
The cable pair cheered US dollar weakness to rise to the highest levels since January 20 but strong US Treasury yields and cautious sentiment ahead of the key data/events seems to have weighed on the quote of late. Also on the negative side were recently upbeat comments from the Fed speakers and political drama in the UK.
Former Tory Prime Minister (PM) Sir John Major recently criticized the current PM Boris Johnson’s ‘Partygate’ scandal while condemning him as “a lawbreaker whose disregard for honesty and ministerial standards risks undermining the UK’s long-term democratic future,” per The Guardian. Following that, UK PM Johnson terms these claims as ‘demonstrably untrue’.
On the other hand, chatters go wild that the UK will propose new terms to overcome the deadlock relating to the Northern Ireland (NI) border. “Liz Truss, UK foreign secretary, is to make new proposals to break the deadlock over post-Brexit trading arrangements in Northern Ireland on Friday, saying that resolving the row with the EU was ‘an absolute priority,’” said the Financial Times (FT). It’s worth noting that UK’s Truss will meet European Commission vice-president Maros Sefcovic for Brexit discussions on Friday.
Elsewhere, the UK dashes more virus-led activity restrictions with easing covid figures. “Case numbers in the last seven days have fallen 25% compared with the previous seven days, while deaths have fallen 20% on the same measure,” said Reuters.
It’s worth noting that the markets turned volatile after the US inflation numbers and the same pushed the Fed speakers to reiterate their hawkish bias, which in turn propelled the US Treasury yields and helped the US Dollar to stay firmer.
US bond coupons refreshed multi-day high the previous day after the US Consumer Price Index (CPI) for January rallied to a nearly five-decade high with a 7.5% YoY figure, versus 7.3% expected and 7.0% prior.
That said, St. Louis Fed President James Bullard went a step farther while supporting 100 bps rate hikes by July and for the balance sheet reduction to start in the second quarter. However, Federal Reserve Bank of Richmond President Thomas Barkin said that the US economy will likely return past the pre-covid trend this quarter. Though, Fed’s Barkin wasn’t as hawkish as Bullard.
Other than the aforementioned catalysts, escalating fears of a Russia-Ukraine war and the US-China trade tussles also weigh on the GBP/USD prices, by way of USD’s safe-haven appeal.
Against this backdrop, the US 10-year Treasury yields remain firmer around the highest levels since July 2019, up one basis point at 2.035% by the press time. However, the S&P 500 Future drop 0.50% at the latest.
Looking forward, first readings of the UK’s fourth quarter (Q4) GDP will be crucial for GBP/USD prices as a firmer print will justify the Bank of England’s (BOE) recent rate hikes, defending them from allegations of late performance. Market expectations suggest headline numbers to remain unchanged at 1.1% QoQ while easing to 6.4% YoY versus 6.8% prior. Following that, the preliminary readings of the US Michigan Consumer Sentiment Index for February, expected 67.5 versus 67.2 prior, may entertain the pair traders.
Technical analysis
A monthly resistance line near 1.3580 restricts short-term GBP/USD upside whereas the 100-DMA challenges the bears around 1.3500. However, MACD and RSI have recently pushed back the bulls.
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.