GBP/USD consolidates around 1.3000

• GBP/USD spent Tuesday flirting with the 1.3000 level and held just above last week’s yearly lows.
• With the BoE increasingly at risk of disappointing market tightening expectations, a break below 1.3000 soon remains a risk.

The GBP/USD flirted with the 1.3000 level on Tuesday, with bears eyeing but failing to test last week’s multi-month lows in the 1.2970 area. Despite the return of European flows after markets closed on Easter Monday, price action in the G10 FX markets has been mostly subdued on Monday, with the notable exception of significant weakness. of the yen as a result of a sharp rise in US and European bonds. returns

Traders await comments from Fed and BoE chiefs Jerome Powell and Andrew Bailey at this week’s IMF and World Bank meetings on Thursday. The former is expected to solidify expectations for 50bp rate hikes at upcoming Fed meetings as the Fed looks to keep US inflation under wraps. Bailey, meanwhile, may strike a more cautious tone on the possibility of further rate hikes, reflecting the BoE’s recent hardline shift in language in its latest policy announcement.

The IMF released its quarterly World Economic Outlook report on Tuesday, lowering global growth forecasts for this year and next, as expected. In particular, the UK was forecast to have the weakest growth outlook over the next two years, coinciding with the BoE’s growing concern about the UK’s outlook with the country currently in the midst of a historic squeeze on living standards. .

Many FX strategists have called money market price expectations of almost 150 bps more tightening this year by the BoE as too excessive. Should markets start to drive this price down amid dovish BoE talks in the coming weeks, GBP/USD remains at risk of falling below 1.3000.

Techs have noted that the pair has formed a descending triangle (with the 1.3000 level as key support) for the past month, another ominous sign that a bearish breakout is in the offing.

Technical levels