- GBP/USD has stabilized at 1.2250, where it is trading flat ahead of a busy week of US/UK economic events.
- Analysts believe that if sentiment continues to deteriorate, the risk sensitive pair could be pressured below 1.20000.
GBP/USD has stabilized at 1.2250 on Monday against the backdrop of a nervous start to the week for global risk assets following weaker-than-expected Chinese industrial production and retail sales data released over the weekend. The data highlighted concerns about global growth as China, the world’s second-largest economy, continues to enforce strict lockdown policies in a bid to contain the spread of Covid-19.
These concerns, coupled with central bank tightening expectations amid still sky-high inflation, have weighed heavily on GBP/USD in recent weeks. While the British Pound is not the highest beta of the major G10 currencies, it is considered more risk sensitive than, say, the Euro. The divergence in economic and central bank policy between the US and the UK is another factor that has weighed heavily on the pair in recent weeks, with better growth in the US and a much more aggressive Fed than the BoE.
Meanwhile, some traders are citing a recent pick-up in the Brexit newsflow, with tensions around the Northern Ireland Protocol back in the spotlight, as a cap on GBP/USD gains. At current levels, almost hitting 1.2250, GBP/USD is almost 100 pips above last Friday’s lows, but has by no means broken through the recent downtrend.
Analysts have been calling for the pair to break below 1.2000 this week if the market’s broader risk appetite continues to deteriorate. In terms of economic events, pound traders have a lot to watch, with US retail sales data for April and Fed Chairman Jerome Powell speaking on Tuesday and labor market data from the UK. UK consumer price inflation and retail sales also released this week. Traders should also watch for comments from New York Fed President and influential FOMC member John Williams later on Monday.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
