Bailey Sends Pound Down
The British Pound has come under heavy selling pressure on Thursday following dovish comments from BOE governor Bailey. In an interview published in UK newspaper The Guardia, Bailey signalled that the BOE could pursue a more aggressive easing path if inflation continues to fall. Prior to these comments, GBP had been among the strongest G10 performers of the last month with traders viewing the BOE as less dovish than the ECB and Fed, in comparison. Resilient UK data and a more neutral tone from the BOE had seen GBP well bid over Q3. However, pricing for a quicker pace of BOE easing is now rising again, putting GBP under pressure.
Powell-Driven USD Rally
Alongside dovish BOE commentary, GBP is also being weighed upon by a stronger US Dollar. Hawkish pushback from Fed’s Powell earlier in the week has seen USD trading up to its best levels in a month. Powell told traders that expectations for a further .5% hike this year were out of sync with the Fed’s core projection of two further .25% cuts. Looking ahead this week, focus will now be on tomorrow’s headline US labour market data. If we see any surprise upside, this should further boost USD near-term, sending GBPUSD down lower. However, if we see any undershooting of forecasts, this will likely revive calls for a further .5% cut, fuelling a reversal lower in USD, underpinning GBPUSD.
Technical Views
GBPUSD
The failure at 1.3431 has seen the market turning heavily lower, price is now back below 1.3295 and testing support at 1.3136. With the bull trend line just below, this is a key picot for the market and a break lower here will be firmly bearish, opening the way for a test of 1.30 and 1.28 next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.