- GBP/USD attracts some buying on Monday and draws support from a modest USD downtick.
- Hawkish remarks by BoE's Broadbent underpin the GBP and act as a tailwind for the major.
- Bets for one more Fed rate hike in 2023 should limit the USD losses and cap any further gains.
The GBP/USD pair gains some positive traction on the first day of a new week and moves away from its lowest level since June 13, around the 1.2550-1.2545 region touched on Friday. Spot prices retake the 1.2600 round-figure mark during the Asian session and draw support from a modest US Dollar (USD) downfall.
China on Sunday announced that the levy charged on stock trading will drop from 0.1% to 0.05% from August 28 – marking the first reduction since 2008 – to boost the struggling market. This, in turn, helps revive investor confidence, which is evident from a generally positive tone around the equity markets and leads to some profit-taking around the safe-haven Greenback, especially after the recent rally to a nearly three-month high. This, along with hawkish remarks by Bank of England (BoE) Deputy Governor Ben Broadbent, underpins the British Pound and provides a modest lift to the GBP/USD pair.
Speaking at the annual Jackson Hole Economic Symposium, Broadbent said on Saturday that monetary policy may well have to remain in restrictive territory for some time yet as the knock-on effects of the surge in prices were unlikely to fade away rapidly. Market participants, however, seem convinced that the BoE will not need to raise rates as high as previously thought to bring inflation back down to the target in the wake of growing recession fears. In fact, money markets are now pricing in a small chance of any further rate hike after the widely anticipated 25 bps lift-off at the September meeting.
Furthermore, Federal Reserve (Fed) Chair Jerome Powell pretty much cemented market expectations for one more rate hike by the end of this year. In fact, Powell said on Friday that the Fed may need to raise interest rates further to cool still-high inflation and added that policymakers would proceed carefully as they decide whether to tighten further or to hold the policy rate constant. This remains supportive of elevated US Treasury bond yields, which, along with worries about a global economic downturn, might help limit any meaningful downside for the USD and cap any further gains for the GBP/USD pair.
Moving ahead, there isn't any relevant market-moving economic data due for release on Monday and the UK banks will remain closed in observance of the Summer Bank Holiday. Foreover, last week's sustained breakdown through the 100-day Simple Moving Average (SMA) suggests that the path of least resistance for the GBP/USD pair is to the downside. This further makes it prudent to wait for strong follow-through buying before confirming that the recent downward trajectory witnessed over the past six weeks or so has run its course and positioning for any meaningful appreciating move, at least for the time being.
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
EUR/USD struggles to hold above 1.0400 as mood sours
EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. The holiday mood kicked in, keeping action limited across the FX board, while a cautious risk mood helped the US Dollar hold its ground and forced the pair to stretch lower.
GBP/USD approaches 1.2500 on renewed USD strength
GBP/USD loses its traction and trades near 1.2500 in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as trading conditions remain thin heading into the Christmas holiday.
Gold hovers around $2,610 in quiet pre-holiday trading
Gold struggles to build on Friday's gains and trades modestly lower on the day near $2,620. The benchmark 10-year US Treasury bond yield edges slightly higher above 4.5%, making it difficult for XAU/USD to gather bullish momentum.
Bitcoin fails to recover as Metaplanet buys the dip
Bitcoin hovers around $95,000 on Monday after losing the progress made during Friday’s relief rally. The largest cryptocurrency hit a new all-time high at $108,353 on Tuesday but this was followed by a steep correction after the US Fed signaled fewer interest-rate cuts than previously anticipated for 2025.
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.