GBPUSD remains above 1.2200 ahead of UK GDP, but appears susceptible at one-week low
On Friday, the GBPUSD pair begins a bearish consolidation phase, oscillating in a narrow zone around 1.2220-1.2225. Just above a one-week low reached during the Asian session.
The US Dollar (USD) manages to hold overnight gains fueled by Federal Reserve (Fed) Chair Jerome Powell’s remarks. And emerges as the clear winner. To be a significant element acting as a headwind for the GBPUSD pair. Powell stated at an International Monetary Fund event that they are not confident in achieving a “stance of monetary policy. That is sufficiently restrictive to bring inflation down to 2% over time.”
Reviving bets on another Fed rate hike and a milder risk tone support the dollar
This follows many Fed members’ recent hawkish comments. Which raised hopes that the US central bank will tighten its monetary policy even further. Aside from that, a lackluster auction of 30-year Treasury notes raises rates across the board and supports the dollar. Aside from that, a generally softer tone in the equities markets is considered. As another factor favoring the safe-haven dollar.
The GBPUSD is under pressure due to expectations that the Bank of England would begin reducing interest rates in 2024.
The pound, on the other hand, is pulled down by a grim forecast for the UK economy. And growing anticipation that the Bank of England (BoE) would begin slashing interest rates shortly. Indeed, the Bank of England’s Chief Economist Huw Pill stated earlier this week. That the dangers of an extreme downturn are significant. And that current market pricing for a first rate drop in August 2024 does not appear completely outlandish.
As traders anticipate the announcement of the UK Q3 GDP figure, the downside remains cushioned.
The GBPUSD pair’s downside remains cushioned, however. As traders choose to wait for the release of the Preliminary UK Q3 GDP report before putting new directional bets. In view of the aforementioned negative underlying backdrop, even a minor letdown in the UK GDP print will be enough to spark fresh selling throughout the world. GBPUSD pair and pave the way for a weekly downward extension.
Traders will draw cues from the release of the Michigan Consumer Sentiment Index later in the early North American session. This, together with US bond yields and overall risk sentiment, will influence USD price dynamics and create short-term trading opportunities in the GBPUSD pair. Nonetheless, spot prices are on course to post weekly losses and are vulnerable to further declines.
