GBP/USD attempts rebound but faces strong dollar, BoE monetary policy

<p>GBP/USD attempted to rise on Monday from its brand new 5½-year low slightly below the 1.4500 support target, but a strengthening dollar prevented any substantial […]</p>

GBP/USD attempted to rise on Monday from its brand new 5½-year low slightly below the 1.4500 support target, but a strengthening dollar prevented any substantial rebound for the currency pair.

Since the beginning of the year last week, GBP/USD has suffered a sharp drop that has continued its steep plunge since mid-December, when the pair began to fall precipitously from its 50-day moving average.

Indeed, the currency pair has been strongly bearish for the past seven months, producing a clearly-defined pattern of lower lows and lower highs since the 1.5900-area in June of last year.

With a resilient US dollar and a Bank of England (BoE) that is seemingly in no hurry to begin its own interest rate hiking cycle to follow in the US Federal Reserve’s footsteps, GBP/USD appears to have little reason to rise in any appreciable manner. With the Fed having already begun raising rates in December and presumably on track for more hike(s) this year, and the BoE still very uncertain as to its own monetary tightening cycle, further losses could potentially be in store for the currency pair.

The better-than-expected US Non-Farm Payrolls data on Friday has contributed to some dollar-strengthening due to expectations that solid employment should encourage a more hawkish Fed with respect to future potential rate hikes in the US. Thursday brings the BoE’s Monetary Policy Summary, which should provide further clues as to how close (or not) the BoE may be to raising interest rates in the UK.

Having just reached down to hit its 1.4500 downside target before rebounding modestly on Monday, GBP/USD is displaying a clear pattern of trending weakness. On any breakdown below the 1.4500 support level, the next major downside target is at the key 1.4250 support area.

GBP/USD Daily Chart


Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.