- GBP/USD continues losing round for the third straight day and slides below the 200-day SMA.
- Expectations that the BoE’s rate-hiking cycle is nearing the end continue to weigh on the GBP.
- Bets for additional rate hikes by the Fed boost the USD and contribute to the ongoing decline.
The GBP/USD pair remains under heavy selling pressure for the third straight day on Friday and drops to its lowest level since January 6 during the first half of the European session.
The pair currently trades around the 1.1930-1.1925 region, just below the very important 200-day SMA, and seems vulnerable to decline further.
The British Pound continues to be weighed down by expectations that the Bank of England's (BoE) current policy-tightening cycle might be nearing the end.
The speculations were fueled by softer-than-expected UK consumer inflation figures released on Tuesday, which seem to have eased pressure on the UK central bank to deliver aggressive rate hikes going forward. This, along with strong follow-through US Dollar buying, is seen dragging the GBP/USD pair lower on the last day of the week.
Growing acceptance that the Federal Reserve will stick to its hawkish stance in the wake of stubbornly high inflation lifts the USD to a fresh six-week high. In fact, the markets are now pricing in at least a 25 bps lift-off at each of the next two FOMC policy meetings in March and May. This, in turn, pushes the yield on the benchmark 10-year US government bond to the highest level since late December. Apart from this, the prevalent risk-off mood further underpins the safe-haven buck.
The GBP/USD pair, meanwhile, fails to benefit from the better-than-expected UK Retail Sales figures for January.
This, along with a sustained break below the 1.2000 psychological mark and a technically significant 200-day SMA, suggests that the path of least resistance for spot prices is to the downside. Hence, some follow-through weakness back towards retesting the YTD low, around the 1.1840 area set in January, looks like a distinct possibility in the absence of any relevant US macro data.
Technical levels to watch
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
GBP/USD holds recovery gains above 1.2900 ahead of BoE policy decision
GBP/USD builds its recovery momentum above 1.2900 in European trading on Thursday, moving away from its lowest level since mid-August. Traders adjust their positions ahead of the key BoE and Fed monetary policy announcements.
EUR/USD stays firm near 1.0750 amid US Dollar pullback
EUR/USD holds higher ground near 1.0750 in the European session on Thursday. The pair finds support from a broad US Dollar retreat, as traders unwind their Trunp win-inspired USD longs ahead of all-important Fed policy announcements.
Gold price faces challenges due to decline in safe-haven flows, awaits Fed rate decision
Gold price (XAU/USD) faced challenges as the dollar-denominated precious metals struggled due to a stronger US Dollar (USD) following the victory of former President Donald Trump in the US election.
BoE set for a second interest rate cut this year on Thursday
Market consensus points to further easing by the Bank of England's (BoE) upcoming interest rate decision on Thursday. The BoE has held rates steady at 5.00% in the previous gathering, but shifting investor sentiment now suggests a possible 25-basis-point cut this week.
Trump wins: Tax cuts come with a cost
Donald Trump’s victory will ensure a lower tax environment that should boost sentiment and spending in the near term. However, promised tariffs, immigration controls and higher borrowing costs will increasingly become headwinds through his presidential term.
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.