- The pound under pressure continues to fall against the euro and the dollar.
- The dollar begins the week of the Fed with increases throughout the market.
- GBP/USD falls for the third day in a row and stands below the 20-day moving average.
The GBP/USD accelerated the decline in the last hour and fell to 1.3491, reaching the lowest level since January 6th. The sharp pullback comes on the back of a rising dollar and also in combination with a rally in the EUR/GBP.
The greenback is appreciating in a context of risk aversion. The futures of the main Wall Street indexes point to an average opening in the red of 0.50%, without showing a rebound after the crash on Friday.
The GBP/USD pullback, going for the third day in a row, took the pair below the 20-day moving average (1.3570), which is about to turn bearish. At the same time, EUR/GBP is at the highest since the beginning of the month. The dollar on Monday is unaffected by lower Treasury yields. The decision of the Federal Reserve will be known on Wednesday.
Regarding economic data, on Monday in the US the preliminary reading of the PMI and the activity index of the Chicago Fed will be published. In the UK, PMI estimates were lower than expected, with manufacturing at 56.9 (consensus: 57.9) and services at 53.3 (55).
“A more modest drop in the PMI compared to previous waves of COVID hints that the cumulative hit to October GDP will be less than 1%. The latest survey points to renewed pressures in the services sector, and reinforces our view that the Bank of England will raise rates again in February,” ING analysts said.
Another issue that continues to dominate in the UK is the pressure on Boris Johnson. The prime minister continues to try to defend his management affected these days by the complaints of parties during the COVID restrictions.
Technical levels
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