- The US dollar is holding firm across the board amid risk aversion.
- The pound is trading lower for the fifth consecutive day, losing more than 500 pips.
- GBP/USD found support at 1.2500 and cut losses.
The GBP/USD fell further and bottomed out at 1.2502, a level last seen in July 2020. The pair then trimmed losses, rising towards 1.2550. Despite pulling away from lows, it remains under pressure amid a strong US dollar.
A daily close off the lows or into positive territory could be a positive sign for GBP/USD, not necessarily suggesting a recovery, but rather increasing the chances of a consolidation.
The dollar continues to rise across the board amid concerns about the global economic outlook, inflation and monetary policy tightening. DXY rose to 103.28, the highest level since January 2017, and then pulled back amid some improvement in investor sentiment. US stocks rebounded and turned positive again. The Dow Jones gained 0.83%.
US economic data showed a record goods trade deficit in March, worse than expected ($125 billion vs. $106 billion), and a decline in pending home sales of 1.2%, less than the expected decline of 1.6%. First quarter GDP data will be released on Thursday.
As for the pound, despite the fall against the dollar and the volatility in the markets, it is recovering against the euro. EUR/GBP fell below 0.8400, hitting a five-day low.
“Bank of England tightening expectations have eased somewhat. WIRP suggests another 25bps hike to 1.0% is fully priced in for the next meeting on May 5th, while the swap market is pricing in 175bps of tightening over the next 12 months vs. 200bps earlier this week. week they would see the policy rate peak close to 2.5%,” explained analysts at Brown Brothers Harriman. Below 1.2500, they see a GBP/USD target at 1.2480, July 2020 low, and then 1.2250, June 2020 low.
Technical levels
Source: Fx Street
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