- GBP/USD has rebounded back to the 1.3030 area after earlier hitting its lowest since November 2020 at 1.29817.
- The pair is on course for a weekly loss of about 0.6%, weighed by buck strength amid hawkish Fed vibes.
GBP/USD hit its lowest level since November 2020 at 1.29817 in earlier Friday trade, weighed at the time by a broad strengthening of the US dollar that say the DXY momentarily eclipse 100 for the first time in nearly two years. But the currency pair has since rebounded to around the 1.3030 level, erasing the day’s losses to about 0.3% versus around 0.7% at worst levels.
That leaves cable on course to post a weekly loss of about 0.6%. The main driver of the USD strength that drove this week’s GBP/USD losses was Fed hawkishness, with the minutes released on Wednesday showing many of the bank’s policymakers were pushing for a 50 bps rate hike at the last meeting, despite Russia’s invasion of Ukraine. The minutes showed strong support for getting rates back to so-called “neutral” quickly, supporting market expectations that the Fed will lift rates in 50 bps intervals at coming meetings.
Meanwhile, the minutes touted a rapid balance sheet reduction rate of $95B per month to start potentially in May, seemingly in line with recent remarks from Fed policymakers that “rapid” balance sheet reduction should start “soon”. Safe-haven demand also likely supported the buck this week amid a drop in global equities, ongoing geopolitical angst and concerns about the upcoming French election.
UK factors did not play a big part in the price action this week, though arguably, sterling upside is being capped by expectations that the BoE is going to turn more dovish in the coming meetings. UK GDP, labour market and Consumer Price Inflation data next week will give traders a little more to think about, although for GBP/USD, US Consumer and Producer Price Inflation readings on Tuesday and Wednesday will be the main event.
An upside surprise in the US data might spur further hawkish Fed bets and further GBP/USD downside. Over the next weeks and months, bears are eyeing a move lower towards the November 2020 lows 1.2850 area and at 1.2680.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD remains pressured below 1.0800 on renewed USD strength
EUR/USD stays under pressure and declines toward 1.0750 following Thursday's recovery. A renewed US Dollar uptick and a cautious mood weigh on the pair, as traders digest the Trump win and the Federal Reserve's monetary policy announcements.
GBP/USD holds lower ground near 1.2950 amid tepid risk sentiment
GBP/USD trades in negative territory at around 1.2950 in the second half of the day on Friday. The emergence of dip-buying in the US Dollar and a tepid risk tone undermine the pair. The BoE’s cautious rate cut could check the pair's downside as traders comments from central bankers.
Gold fluctuates below $2,700 amid stronger USD, positive risk tone
Gold trades below $2,700 in the early American session on Friday and is pressured by a combination of factors. Hopes that Trump's policies would spur economic growth and inflation, to a larger extent, overshadow the Fed's dovish outlook, which, in turn, helps revive the USD demand.
Week ahead – US CPI to shift market focus back to data after Trump shock
After Trump comeback, normality to return to markets with US CPI. GDP data from UK and Japan to also be important. But volatility to likely persist as markets assess impact of Trump.
October’s US CPI rates to be the next big test for the greenback
With the US elections being over, Trump getting elected and the Fed having released its interest rate decision, we take a look at what next week has in store for the markets. On the monetary front a number of policymakers from various central banks are scheduled to speak at some point or the other.
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.