- GBP/USD falls for the fourth day in a row and hits a new 1-month low.
- Aggressively, Fed expectations and a softer risk tone are supporting the dollar and putting some pressure on it.
- Investors are waiting for Fed Chairman Jerome Powell’s speech to get a significant boost.
The pair GBP/USD attracts new sellers after an intraday rally to the 1.2055 zone and falls for the fourth day in a row on Tuesday. Spot prices fall to 1-month lows in North American session, with bears attempting to challenge the technically significant 200-day SMA near 1.1950.
The dollar reverses the intraday slide and remains near the 1-month highs reached on Monday, which in turn puts bearish pressure on the GBP/USD pair. US monthly employment data (NFP), released last week, fueled speculation that the Federal Reserve (Fed) will maintain its hawkish stance. This, in turn, continues to support a modest intraday rally in US Treasury yields and acts as a tailwind for the dollar.
Instead, the Bank of England signaled last week that it was about to take a break from the current rate-raising cycle. In fact, the British central bank removed the phrase that it would “respond strongly, as necessary.” Furthermore, BoE Governor Andrew Bailey has stated that inflation will fall more rapidly during the second half of 2023. This, in turn, is seen weighing on the British pound and contributing to the offered tone surrounding the GBP/USD pair.
Apart from this, the cautious mood prevailing in the markets – amid looming recessionary risks – further benefits the relative safe-haven status of the dollar against its British counterpart. The intraday drop on Tuesday could also be attributed to some technical selling below the key psychological 1.2000 level. This, in turn, supports prospects for an extension of the depreciation move, although traders could wait for Fed Chairman Jerome Powell’s speech for further impetus.
Investors will closely watch Powell’s comments on inflation and monetary policy for clues about the Fed’s future rate hike path. This, in turn, will play a key role in influencing the price dynamics of the Fed. USD in the short term and produce some significant trading opportunities around the GBP/USD pair in the absence of any relevant economic releases to move the market.
Technical levels to watch
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.
