- GBP/USD falls after a Senior Loan Officer Opinion Survey report showed US banks expect credit conditions to tighten.
- US Treasury yields continue to gain ground, undermining GBP/USD.
- Debt ceiling debate in Washington could trigger exits to safe-haven pairs; future inflation data could benefit the US dollar.
The GBP/USD pair pulls back after hitting a fresh year-to-date high of 1.2668, after the US Federal Reserve (Fed) reported the Survey of Loaning Officials (SLOOS), which showed that banks Americans expect a tightening of credit conditions. However, the impending monetary policy of the Bank of England (BoE) dampened the pound sterling (GBP). At the time of writing, GBP/USD was trading at 1.2618.
US banks expect a tightening of credit conditions, which weighed on GBP/USD.
Wall Street reeled after the SLOOS report, which showed credit conditions tightening and business demand for loans weakening. Banks expect to tighten standards across all loan categories in the face of expected deterioration in credit quality, lower risk tolerance, and concerns about funding costs, liquidity, and deposit outflows.
The GBP/USD pair pulled back after the report reported, turning from around 1.2640 at current rates, as the dollar regained some ground. The Dollar Index (DXY), which tracks six currencies against the US dollar (USD), rose 0.15% to 101.370.
Meanwhile, US Treasury yields continued to gain ground, with the 10-year yield at 3.520%, up seven and a half points, undermining GBP/USD.
Apart from this, the Federal Reserve officials had started to cross the wires, with Aaron Goolsbee of the Chicago Fed crossing the wires. He said the Fed would rely on the data, and it’s too early to judge rate decisions for the June meeting.
Discussions in Washington could change market sentiment, as the debt ceiling debate between the White House and the US Congress could trigger outflows into safe havens such as the Japanese yen (JPY), the franc Swiss (CHF) and gold.
According to Janet Yellen, the US Treasury Secretary, there are no accessible alternatives to resolve the debt limit issue in Washington without the help of the US Congress. Meanwhile, US President Joe Biden is expected to meet with lawmakers on May 9 to advance negotiations on the ceiling increase.
The US economic agenda will include data on inflation in the coming days. Any significant jump in consumer or producer data could benefit the US dollar; therefore GBP/USD could continue its downtrend, and is expected to drop below 1.2600.
Earlier, the US Department of Commerce showed wholesale inventories were flat in March, disappointing estimates of 0.1% m/m. On a year-over-year basis, inventories rose 9.1% in March, despite a first-quarter decline, as higher US consumer spending contributed to lower inventories.
GBP/USD Key Technical Levels
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.
