GBP/USD falls near 1.1100 as aggressive Fed predictions and the US NFP come into prominence.

Oct 07, 2022

VOT Research Desk

On the back of increasing hawkish Fed wagers, the GBP/USD is anticipated to lag towards 1.1100.

A rate increase of 125 basis points is anticipated by Fed policymakers for the rest of 2022.

This year, investors have begun to speculate about cable parity.

In the Tokyo session, the GBP/USD pair provided a negative break of the consolidation built in a constrained range between 1.1145 and 1.1173. The cable is trading near its bottom from Thursday at 1.1112 and is likely to fall below the round-level safety cushion of 111.00. Since the S&P500 index is creating a cushion following a downward move, risk-profile is waiting for new indications from the index. Whether the inventory adjustment process will be an accumulation or distribution is impossible to predict at this time.

The US and South Korea have been working together to counter North Korea’s provocations with joint exercises with a US aircraft carrier, which is supporting the continuance of risk aversion. As safe-haven attraction increases, the US dollar index (DXY) is gaining strength and is on track to pass the intermediate obstacle of 112.30. In addition, hawkish remarks from Federal Reserve (Fed) policymakers are helping to support the DXY.

Charles L. Evans, president of the Chicago Fed Bank, predicts that by the spring of 2023, the central bank will achieve its goal rate of 4.5–4.75%. And in the final two monetary policy sessions, the central bank will raise interest rates by 125 basis points (bps).

However, attention will continue to focus on US Nonfarm Payrolls (NFP) statistics. The Fed has been raising interest rates, and the labor market is incredibly tight. As a result, the payroll data predictions, which were formerly 315k, have decreased to 250k.

Poor economic fundamentals in the UK have compelled institutional investors to weigh the chances of cable parity this year. The UK government’s pullback of tax cuts has protected the sterling economy from being exposed to the greatest level of debt since 1972. Fitch Ratings has maintained its AA- rating on the BOE sovereign while changing the outlook from Stable to Negative.

GBP/USD Technical Report