- Markets are risk-off and that is sending GBP below 1.2000.
- GBP/USD is breaking out of a coil which is significant.
- A 100% measured move of the range will target the prior structure at 1.1900.
At the time of writing, GBP/USD is down some 0.9% falling to a low of 1.1976 from a high of 1.2111. Risk currencies, such as the British pound, are under pressure as protests against COVID restrictions in China knocked market sentiment.
GBP/USD is falling below the psychological 1.2000 level and meeting short-term dynamic support. Additionally, fears of a lengthy UK recession were seen weighing on sentiment. Investors await to see what the Bank of England's (BoE) next move will be. There will be several BoE members due to speak this week, including BoE governor Andrew Bailey on Tuesday and chief economist Huw Pill on Wednesday.
The Old Lady has been trying to combat soaring inflation without damaging the economy too much in the process. ''Inflation pressures will remain elevated during 2023, forcing the Bank of England to deliver further hikes,'' analysts at Danske Bank explained. ''We do however see the peak rate well below market pricing and we expect the first cut to be delivered during 2024.''
Ears out for Fed speakers
Meanwhile, Federal Reserve speakers will be key this week. On Monday, New York Federal Reserve Bank President John Williams said that he believes the Fed will need to raise rates to a level sufficiently restrictive to push down on inflation, and keep them there for all of next year:
"I do think we're going to need to keep the restrictive policy in place for some time; I would expect that to continue through at least next year," Williams said at a virtual event held by the Economic Club of New York, adding that he does not expect a recession.
James "Jim" Bullard, president and CEO of the Federal Reserve Bank of St. Louis, has said that rates need to go higher to bring inflation down. ''We've got a ways to go to get restrictive on policy.'' He also said the Fed ''will have to keep rates at a sufficiently high level all through 2023 and into 2024.''
GBP/USD technical analysis
The bears are moving on the trendline support. However, a correction could be on the cards first as illustrated on the hourly chart above. Nevertheless, the price is breaking out of a coil and a 100% measured move of the range will target the prior structure at 1.1900 and then a 200% measure move aligns with 1.1800.
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 extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
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.