- GBP/USD remains under pressure after encountering resistance at 1.2600.
- The dollar remains firm in the market, DXY at cycle highs.
The GBP/USD returned to negative ground after failing to hold. Hours ago it fell to 1.2535, the lowest level since July 2020. From the lows the pair rebounded and rose to 1.2600, which contained the rebound. It is trading around 1.2565, still unable to break a four-day losing streak, in which it has accumulated a drop of almost 500 pips.
The declines continue to be guided by the strength of the dollar, although the pound in relative terms is outperforming its European rivals, possibly not because it was “the prettiest” on Wednesday, but rather “a little less ugly”.
The Monetary adjustment expectations by the Bank of England have been slightly reduced in recent sessions given the negative climate in the markets, and also continue to be lower than those of the Federal Reserve. This largely explains the decline in GBP/USD, further aided by the deterioration in equity markets.
The fed the rate is expected to rise by 50 basis points to 0.75-1.00% at the May 3-4 meeting, while on May 5 the Bank of England is expected to announce a 25 basis point increase to 1%.
The dollar Wednesday remains strong with DXY posting new highs since 2020. Treasury yields are stable, far from recent peak.
If it rises above 1.2600, GBP/USD could gain support for a firmer recovery. While to the downside, a return below 1.2550 would expose the recent low. The next support below it can be seen at 1.2500.
Technical levels
Source: Fx Street
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