- GBP/USD has been unable to recover amid Sino-American tensions.
- Concerns about negative interest rates and political issues are also weighing on the pound.
- Monday's four-hour chart is pointing to losses for the currency pair.
Second, coming for sterling? Dominic Cummings, Prime Minister Boris Johnson's powerful adviser, has been under pressure to quit after a revelation that he violated the lockdown while showing symptoms of COVID-19. That scandal is dogging the government, yet there are greater issues for pound traders to ponder on.
While Brits are enjoying their spring bank holiday – albeit under lockdown restrictions – sterling may continue suffering.
Negative interest rates? Speculation remains rife that the Bank of England will set sub-zero borrowing costs. The latest BOE member was David Ramsden, who opened the door to such a move. He followed the footsteps of Governor Andrew Bailey and others. While negative interest rates have had little benefit for Japan and the eurozone, they may have an adverse effect on the exchange rate.
More: Negative Rates: Only good for downing currencies?
Lifting lockdown is lengthy: PM Johnson's main task is managing the coronavirus crisis. He previously announced that further easing of the shuttering will be considered in June, which is a week from now. While COVID-19 statistics continue improving, they remain stubbornly high and may require a gradual process.
Source: World Info Meters
Brexit: After a week of finger-pointing around the lack of progress in talks, negotiators will try to advance toward an accord on future EU-UK relations. Brussels wants Britain to adhere to its regulations in return for easy access to the bloc's single market – a demand London refuses. That is the main sticking point, and there is no evidence that it has changed.
Tense Sino-American relations: Weekend protests in Hong Kong – against China's suggested security law which tightens Beijing's grip on the territory– kept tensions high. The US and China also continue clashing about the origins of coronavirus, activities of Chinese firms in America, Taiwan, and more. The safe-haven dollar is in demand.
Washington's intentions of conducting a nuclear test have also caused concern, with officials in China warning of a "new cold war." The silver lining, for now, is that both countries have vowed to hold up the trade deal signed in January.
All in all, there are no reasons for sterling to spring back up – nothing has changed in this Spring Bank Holiday.
GBP/USD Technical Analysis
Pound/dollar is suffering from downside momentum on the four-hour chart and trades below the 50, 100, and 200 Simple Moving Averages – all bearish signs. Moreover, it is capped by a downtrend channel that hits the price at around 1.2220.
Support awaits at 1.2165, a former double bottom, and the daily low. It is followed by 1.2080, May's trough, and by the psychologically significant 1.20 level.
Some resistance is at 1.2190, the daily high, with the downtrend providing another cap. Next, 1.2250 was another double-bottom and 1.23 was the peak last week.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0550 after mixed US data
EUR/USD stays under modest bearish pressure and trades below 1.0550 in the American session. Although the US Dollar struggles to gather strength following mixed macroeconomic data releases, the risk-averse market environment doesn't allow the pair to gain traction.
GBP/USD recovers modestly, trades near 1.2650
GBP/USD stabilizes near 1.2650 after falling toward 1.2600 earlier in the day. Nevertheless, the pair struggles to gather bullish momentum as the deepening Russia-Ukraine conflict causes investors to stay away from risk-sensitive assets.
Gold extends gains beyond $2,660 amid rising geopolitical risks
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.
BTC hits an all-time high above $97,850, inches away from the $100K mark
Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.