The GBP/USD has suffered a strong retracement of more than 300 pips which has taken it from the daily high of the Asian open at 1.2633 to new 22-month low at 1.2325. The warning of a more than possible recession in the United Kingdom by the Bank of England and the strengthening of the dollar have caused extreme weakness in the pound sterling.
The BoE announced today that it was raising interest rates by 25 basis points to 1%, while at the same time talking about the UK’s possibility of a recession due to high inflation rates. The comments have been received as a blow for the pound, which anticipates a future suffering of the British economy.
On the other hand, the US dollar has continued to rise this Thursday after yesterday’s post-Fed decline, buoyed by risk aversion and rising US yields. The DXY index which measures the greenback has hit multi-year highs at 103.94. In addition, the US treasury bond yield The 10-year bond stands at 3.09% and the 30-year bond stands at 3.18%, both at their highest level since the fourth quarter of 2018.
GBP/USD Levels
With the pair quoting at time of writing above 1.2338, shedding 2.30% daily, the first support is in the psychological zone 1.2300which if broken will make way for a fall towards the area 1.2251/57 (where the lows of June 29 and 30, 2020 are). further down wait 1.2075 (soil from May 18, 2020).
To the upside, the pound needs to come back firmly on 1.2500 in order to gain momentum towards the surroundings of 1.2615 (where the ceiling of April 29 is), and from there to be able to advance to the resistance 1.2638 (nine-day high on record after Fed’s May 4 decision).
Source: Fx Street
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