- GBP/USD falls below 1.1900 and approaches 1.1800, due to risk aversion.
- Amid a light calendar, comments from the Federal Reserve will give GBP/USD direction.
- GBP/USD will consolidate around 1.1800-1.2000 in the absence of catalysts.
The British pound (GBP) fell sharply below the 1.1900 figure in the North American session amid risk aversion as the Covid-19 crisis worsens in China, reporting its first related death in six months, raising concerns about lockdowns in the second-largest economy. In the past week, hawkish rhetoric from the Federal Reserve (Fed) weighed on investors, lifting global stocks from their yearly lows. At the time of writing, GBP/USD is trading at 1.1816, down 0.60% from its opening price.
Risk aversion weighed on sterling
Stocks remain lower, hit by news of the Covid-related deaths of three people over the weekend in China, raising fears that authorities will once again impose strict measures to curb the outbreak. The United States (US) Economic Agenda revealed that the Chicago National Activity Index fell into negative territory in October, down to -0.05 from 0.17 in September. Apart from this, although the October CPI and PPI reports in the US were softer than expected, a strong US Retail Sales report increased the chances that the Fed will continue to tighten monetary conditions.
Meanwhile, the Dollar Index, a gauge of the greenback against a basket of currencies, rose 0.62% to 107.646, putting a headwind for GBP/USD.
On the UK side, the Office for Budget Responsibility (OBR) forecasts a 1.4% drop in GDP for 2023, worse than the 1.8% growth estimate in March. Meanwhile, expectations that the Bank of England (BoE) will tighten monetary policy
What to do
The UK economic calendar is light for the week ahead of Wednesday’s S&P Global/CIPS PMIs. On the other hand, the US calendar will include more statements from the Fed.
GBP/USD Price Analysis: Technical Perspective
After rallying to fresh three-month all-time highs above 1.2000, GBP/USD pulls back to test the 13th September swing high turned support at 1.1738. However, until sterling sellers break above 1.1800, the currency could consolidate at 1.1800-1.2000, pending further catalyst.
GBP/USD key resistance levels are at 1.1900, followed by the psychological level of 1.2000. On the other hand, GBP/USD’s first support emerges at 1.1800, which, once broken, would expose the aforementioned 1.1738, followed by the 100-day EMA.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
