The decline in the value of the GBPUSD following the US bank.
GBPUSD falls into the 1.24s versus the US Dollar (USD) during the European session on Tuesday. As the USD gets support from reports of First Republic Bank’s emergency bailout over the weekend. This soothes markets and indicates that the Federal Reserve is far more likely to raise interest rates at its meeting. Which concludes on Wednesday.
GBPUSD is under short-term pressure due to a bearish two-bar reversal pattern.
Technically, the GBPUSD pair continues to retreat from fresh year-to-date highs in the 1.2580s achieved on April 28. And forms a two-bar reversal pattern that predicts follow-through down in the very short term. But the overall trend remains bullish.
The US Dollar finds strength from reports that JP Morgan has stepped in to save ailing US regional lender First Republic Bank (FRB). Purchasing the bank following worries that it might be taken over by the Federal Deposit Insurance Corporation (FDIC) over the weekend.
Bailout indicates that the Fed will almost probably raise interest rates on Wednesday.
After last week’s data showed that prices in the United States remain sticky. The US Dollar is still supported by higher-than-expected PCE inflation data. The Federal Reserve’s preferred inflation gauge.
The Federal Reserve (Fed) has crystallized expectations for a 25-basis point (bps) rate hike at the forthcoming FOMC meeting on Wednesday, May 3 – according to Feds Funds Futures data, the probability of a quarter percent hike has grown from 85% last week to 97% at the time of writing. However, data for March showed that UK inflation remained above 10% for the seventh consecutive month, indicating that the Bank of England (BoE) is far from finished raising interest rates.
In contrast, the US Federal Reserve (fed) is seen to be reaching the conclusion of its rate-hiking cycle. As a result, the possibility of comparatively higher UK interest rates favors the Pound Sterling over the US Dollar, as it will draw greater capital inflows.
Furthermore GBP gains are being supported by an unexpected MoM rise in UK home prices of 0.5% in April, contrasting the negative amount forecast, according to data from Nationwide, the UK’s largest mortgage provider.
Moreover according to data from the Commodity Futures Trading Commission (CFTC). Speculative investor movements have been increasingly supportive of the pound in recent years. In recent weeks, non-commercial traders have increased their long bets more than commercial traders. Who have increased their short bets.
JOLTS Job Openings the primary data release prior of May’s FOMC meeting.
The publication of the March JOLTS jobs report data at 14:00 GMT might have an influence on the pair. For example, following the announcement of last month’s JOLTS. The US Dollar weakened as job opportunities decreased from 10.4 million to 9.9 million.
