- GBP/USD rebounds from five-week low, picks up bids of late.
- Fed propelled USD but Evergrande headlines, doubts over rate hike trigger consolidation mode.
- Risk-on mood, UK inflation expectations keep buyers hopeful even as BOE isn’t ready for any moves.
- US PMIs, Brexit and China news also lengthen the watcher’s list.
GBP/USD consolidates the post-Fed losses, up 0.08% intraday while refreshing daily high to 1.3633 heading into Thursday’s London open. In doing so, the cable pair recovers from a monthly low as upbeat market sentiment underpins the US dollar pullback.
That said, the US Dollar Index (DXY) drops 0.10% on a day while stepping back from a one-month peak, paring the gains earned due to the Federal Reserve’s (Fed) tapering announcement.
The risk-on mood, mainly due to headlines concerning Evergrande and doubts over the Fed rate hike, could be linked to the recent optimism in the market. Also, chatters that the US policymakers make progress on the much-awaited stimulus and the US Food and Drug Administration (FDA) approved Pfizer booster shot of the covid vaccine for the aged above 65 add to the upbeat sentiment.
On Wednesday, the Fed matched market expectations of keeping the benchmark rate unchanged at 0.25% but the policymakers were divided over the hike, now expecting a lift from either 2022 or 2023 versus the previous support for 2023. It’s worth noting that the US central bank cut the 2021 growth forecast and remained unclear on when the rate will start rising after the tapering concludes.
Further, Chairman Jerome Powell propelled the greenback by not only signaling the positive conditions for the consolidation of the asset purchase but also the start of taper as soon as the next meeting, even if on good employment data not needing too strong figures.
On the other hand, UK PM Boris Johnson’s US visit couldn’t fetch any major results over the UK-US post-Brexit trade deal as American policymakers push for solving the deadlock over the Northern Ireland (NI) protocol. As per the latest data, UK’s exports to NI slumped due to Brexit.
Amid these plays, stock futures remain mildly bid while the US Treasury yields remain inactive after declining over two basis points (bps) to 1.30% the previous day amid an off in Japan.
Looking forward, record jump in UK inflation expectations, per Citi/YouGov survey marked by Reuters, seem to favor the hawkish hopes from the “Old Lady”.
However, the recent fundamentals concerning jobs and inflation need to be taken with a pinch of salt amid the fresh COVID-19 wave and hence BOE policymakers may remain cautiously optimistic, which in turn can help GBP/USD to extend the latest corrective pullback. Also important are the flash readings of September month activity data from the Markit and weekly job numbers for the UK and US.
Read: Bank of England Preview: Action to revolve around tapering prospects
Technical analysis
Unless staying below the previous support line from July, near 1.3635, GBP/USD stays directed towards lows marked in August and July, respectively around 1.3600 and 1.3570. Even if the cable pair rises past 1.3635 on a daily closing basis, 50% Fibonacci retracement (Fibo.) of December 2020 to June 2021 upside close to 1.3695 will challenge the bulls. Considering the bearish MACD, the pair sellers are likely set to keep the driver’s seat.
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
AUD/USD consolidates near 19-month peak as traders await US PCE Price Index
AUD/USD oscillates in a range below the 0.6900 mark, as traders opt to move to the sidelines ahead of the US PCE Price Index. In the meantime, the RBA's hawkish stance, the optimism led by additional monetary stimulus from China, the prevalent risk-on mood, and a bearish USD continue to act as a tailwind for the pair.
EUR/USD rebounds on Thursday after midweek pullback
EUR/USD tuned back into the high end on Thursday, getting bolstered by a broad-market selloff in the Greenback. US data that printed better than expected helped to ease concerns of a possible economic slowdown within the US economy looming over the horizon.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Ethereum investors show bullish bias amid ETF inflows and positive funding rates, exchange reserves pose risk
Ethereum traded around $2,640 on Thursday, up more than 2% following increased bullish bias among investors, as evidenced by ETH ETF net inflows and an uptrend in funding rates. However, investors may be wary of a potential correction from ETH's rising exchange reserve.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.