- GBP/USD witnessed strong selling for the fourth day in a row and fell to a new year-to-date low.
- Aggressive Fed rate hikes, risk-off sentiment underpinned USD and put pressure.
- Mostly upbeat US Durable Goods Orders continued to support the strong offered USD tone.
The pair GBP/USD continued to lose ground early in the American session and plunged to its lowest level since September 2020, around the 1.2675 region in the last hour.
The US dollar rose to a high in more than two years and continued to be supported by growing acceptance that the Fed would tighten monetary policy at a faster pace to curb runaway inflation. Indeed, markets now expect the US central bank to raise interest rates by 50 bps at each of its next four meetings in May, June, July and September.
This, coupled with the prevailing risk aversion environment, fueled safe-haven flows into the dollar. The prospect of rapid interest rate increases in the US, coupled with prolonged COVID-19 lockdowns in China, fueled concerns about a global economic slowdown. This, in turn, affected risk sentiment and benefited traditional safe-haven assets.
On the economic data front, US Durable Goods Orders disappointed market expectations and rose 0.8% MoM in March. This, however, marked a solid rebound from the previous month’s upwardly revised reading of -1.7%. Adding to this, orders excluding transportation items rose 1.1% vs. 0.6% expected and supported the dollar.
In contrast, the British pound was hit by recent disappointing national data, which indicated that the UK economy is under pressure from rising cost of living. This could have forced investors to reduce their bets on future interest rate hikes by the Bank of England and supports prospects for further GBP/USD depreciation.
With the latest leg down, prices for the pair have retraced over 400 pips from near the 1.3100 round level touched last week. That said, mildly oversold conditions on short-term charts could prevent bearish traders from placing aggressive bets and help limit any further losses for GBP/USD, at least for now.
Technical levels
Source: Fx Street
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
