GBP/USD offers dull welcome to UK PM Truss near 1.1500, focus on BOE, Fed policymakers
|- GBP/USD retreats towards the yearly low marked on Monday.
- Fears that incoming UK PM won’t be able to avoid British recession, despite huge stimulus, favor bears.
- Firmer US data, hawkish Fed bets add strength to the downside bias.
- BOE Monetary Policy Hearings, comments from the BOE/Fed policymakers will be in focus for immediate directions.
GBP/USD retreats from the weekly top towards 1.1500 during Wednesday’s Asian session amid the firmer US dollar and fears surrounding the UK economy. In doing so, the Cable pair fails to cheer the chatters surrounding the multi-billion pounds worth of stimulus from incoming Prime Minister Liz Truss.
Earlier in the week, Liz Truss won the PM candidate race, which in turn propelled chatters over her plan to freeze energy prices and help power companies in Britain. “British Prime Minister Liz Truss plans to freeze energy prices for households for 18 months and allow energy companies to take out government-guaranteed loans to make up for the difference between the wholesale and retail prices,” BBC reported Tuesday. The news also stated that Truss is expected to unveil her plan on Thursday. With this, UK PM Truss proposed to freeze roughly £130 billion in household energy bills while mulling another £40 billion for small businesses.
However, fears of the recession took clues from the firmer data and growing uncertainty over the Bank of England’s (BOE) next move.
That said, US ISM Services PMI rose to 56.9 versus 55.1 market forecast and 56.7 prior. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7 respectively versus 45.0 and 44.1 initial forecasts in that order. Even so, the US Dollar Index (DXY) rose after the release and refreshed a 20-year high. It should be noted that the CME’s FedWatch Tool signals a 72.0% chance of 50 basis points (bps) Fed rate hike in September versus 57% one-day ago.
Elsewhere, UK PM Truss’ tough stand on China also weighs on the GBP/USD prices ahead of the BOE Governor Bailey’s testimony in front of the Parliament, as well as speeches from multiple BOE policymakers.
Amid these plays, Wall Street closed in the red while the 10-year US Treasury yields jumped the most in a month to poke the highest levels since mid-June. It’s worth noting that the S&P 500 Futures print mild losses and weigh on the Cable pair of late.
In addition to the BOESpeak, multiple policymakers from the Fed are also likely to entertain GBP/USD traders ahead of tomorrow’s speech from Fed Chair Jerome Powell.
Technical analysis
Consecutive two Doji candlesticks around the lowest levels since March 2020, around 1.1410, join oversold RSI conditions to challenge the pair bears.
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