GBP/USD Skids through $1.25 As Dollar Rallies
Fiona Cincotta March 13, 2020 1:31 PM
GBP/USD drops to fresh 5 month lows
GBP/USD has dropped to fresh session lows through the key psychological level of $1.25 and within a breath of year to date lows. This is the 4th straight session that the GBP has fallen against the strengthening USD.
BoE Minutes - more room to cut
Meanwhile GBP is on the back foot after the BoE released the minutes to its unscheduled policy meeting when it voted to cut interest rates from 0.75% to 0.25%. The minutes show that the BoE excpect UK economic activity to weaken over the coming week and months and that they will also have more information on the size of that hit as data starts coming through over Q2. The BoE believes there are still tools in its toolbox and another rate cut is possible.
GBP also appears to be questioning Boris Johnson’s approach to coronavirus. UK school are still open whilst those across Europe and the US are starting to close. There is no ban on large scale public meetings in England yet. A lack of confidence in the approach means the pound sees a bigger financial hit as the virus spreads uncontrolled
In addition to the coronavirus hit to the economy, GBP traders are also fretting about its impact on post Brexit trade talks. Talks next week have been postponed. This put pressure on an already very tight timeline.
US Consumer confidence up next
US Consumer confidence data is next. The release is for March, therefore will reveal the first coronavirus impact. Expectations are for consumer confidence to fall to 95, down from 101 in February which was the second highest reading since the financial crisis. So far, the US economy hasn’t experienced large scale closures but that dean’s mean that the mind of the US consumer isn’t changing. Markets have already priced in a big economic hit from coronavirus as long as consumerism remain relatively optimistic the dollar should hold its gain.
GBP/USD Levels to watch
GBPUSD is trading at fresh 5 month lows, through $1.25. It tades below its 50, 100 & 200 sma on a bearish chart.
It trades at its daily low of $1.2466. Support can be seen at $1.2450 and $1.2350 lows from October last year.
Support can be seen at $1.2625 (today’s high) , $1.2705 (200 sma) and $1.2745 (low 3rd March).
GAIN Capital UK Limited (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.