- The pound remains under pressure after the Bank of England decision.
- The US dollar gains momentum as stocks decline and despite falling US yields.
- GBP / USD is down nearly two hundred pips, heading for a third lower close since December.
The fall of GBP/USD it was triggered by the Bank of England and, more recently, bolstered by a rally in the US dollar across the board. The pound broke below 1.3500, hitting 1.3482, the lowest level in a month. It is dropping nearly two hundred pips on Thursday, having the worst performance in weeks.
The Bank of England’s (BoE) decision to keep rates and QE unchanged weighed on the pound which lost ground to all its rivals. Governor Baily’s press conference did not alter the cable sell-off. Danske Bank analysts see three rate hikes in 2020 (15 bps in February, 25 bps in May and 25 bps in November). “The reason is that we expect the economic recovery to continue (including employment growth) amid still high inflation.”
More recently, the GBP / USD slide gained momentum after breaking below 1.3500 and also amid a stronger US dollar. The DXY is up 0.60% to 94.45, the highest level since mid-October. At the same time, US yields are falling sharply with the 10-year yield at 1.52%, close to Wednesday’s low.
The outcome of the FOMC meeting so far has not been negative for the dollar. On Friday, the critical Non-Farm Payrolls report expires. The consensus points to a net job gain of 425,000 and the unemployment rate will drop to 4.7%.
Technical levels
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