- GBP/USD picks up bids to refresh intraday high, extends bounce off all-time low.
- US dollar pares recent gains amid sluggish session, softer data, inflation expectations add strength to the DXY pullback.
- BOE resists taming GBP strength, UK policymakers refrain from reversing any measures announced recently.
- US data, Fedspeak will be crucial for directions, bears are likely to keep reins amid pessimism surrounding UK.
GBP/USD reverses the previous day’s heavy losses as it bounces off the all-time low to 1.0780 during early Tuesday morning in Europe. In doing so, the Cable pair renews intraday high while also snapping the five-day downtrend.
The quote’s latest gains could be linked to the hopes from the UK Chancellor (Finance Minister) Kwasi Kwarteng that he will be able to restore investor confidence via his medium-term budget, after sending sent sterling and government bonds into freefall the previous day. Also, expectations that the Bank of England (BOE) won’t need to intervene to defend the British Pound (GBP) add strength to the GBP/USD rebound. “The threshold for the Bank of England intervening in the foreign-exchange market to stabilize the pound is high,” said the HSBC Bank.
British finance minister Kwasi Kwarteng will set out a "Medium-Term Fiscal Plan" on Nov. 23, alongside growth and borrowing forecasts from the Office for Budget Responsibility, Britain's finance ministry said on Monday. The news also quotes the British Finance Ministry as saying, "The Fiscal Plan will set out further details on the government's fiscal rules, including ensuring that debt falls as a share of GDP in the medium-term."
On the other hand, the US Dollar Index (DXY) retreats from the 20-year high, down 0.40% intraday near 113.68 by the press time, as softer yields join downbeat US data and inflation expectations.
That said, US Treasury yields retreat from the multi-year high while the S&P 500 Futures also print mild gains by the press time. That said, US 10-year Treasury yields rose to the highest levels in 12 years while the 2-year bond coupons refreshed the 15-year top as traders rushed to the risk safety. Further, Chicago Fed National Activity Index weakened to 0.0 in August versus 0.09 market expectations and an upwardly revised prior reading of 0.29. Further, the US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, signaled that the gauges refreshed the multi-day low on Monday. While noting the details, the longer-term inflation expectations dropped to the lowest level since July 13, 2022, whereas the 5-year benchmark slumped to the lowest levels since June 2021 with the latest figures being 2.32% and 2.33% respectively.
It should be noted that the scathing response to the UK Chancellor Kwarteng’s mini-budget triggered fears of more pain for the British economy and dragged the cable to an all-time low, backed by the hawkish Fedspeak. Adding to the downside fears was the BOE’s inaction afterward.
To sum up, GBP/USD is likely to extend the latest corrective bounce but the upside potential is limited ahead of the US CB Consumer Confidence for September and Durable Goods Orders for August. Also important to watch are headlines from Britain.
Also read: US Consumer Confidence Preview: Near-term relief or more risk aversion?
Technical analysis
GBP/USD rebound needs validation from the 1.1000 psychological mark to aim for the previous support line from May, around 1.1270-80 by the press time. Otherwise, a pullback towards the year 1985 bottom close to 1.0520 and then to the recent low near 1.0340 can’t be ruled out.
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 looks sidelined below 1.1400, Dollar on the defensive
EUR/USD now loses some upside traction amid a consolidative range in the area below the key 1.1400 barrier at the beginning of the week, all against the backdrop of a mild pullback in the US Dollar and further repricing of US tariffs.
GBP/USD remains well bid just below 1.3200
Following an early uptick to two-week highs around 1.3200, GBP/USD now gives away part of that advance and settles around 1.3170 amid a tepid retracement in the Greenback. All eyes remain on the unfolding US-China trade developments.
Gold retreats from record-high, holds above $3,200
Gold pulls away from the new record-high it set at $3,245 at the weekly opening but manages to hold comfortably above $3,200. Easing concerns over a deepening trade conflict between the US and China seem to be causing XAU/USD to enter a consolidation phase.
Six Fundamentals for the Week: Tariffs, US Retail Sales and ECB stand out Premium
"Nobody is off the hook" – these words by US President Donald Trump keep markets focused on tariff policy. However, some hard data and the European Central Bank (ECB) decision will also keep things busy ahead of Good Friday.
Is a recession looming?
Wall Street skyrockets after Trump announces tariff delay. But gains remain limited as Trade War with China continues. Recession odds have eased, but investors remain fearful. The worst may not be over, deeper market wounds still possible.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.