GBP/USD has been checked back in trading last week as the dollar firmed but the weekly close was still salvaged somewhat above the pivotal 1.1400 mark
GBP/USD has been checked back in trading last week as the dollar firmed but the weekly close was still salvaged somewhat above the pivotal 1.1400 mark. But as we get into the early stages this week, sellers are looking to make a play by taking a look below that with a firmer dollar also helping to keep the downside pressure going at the moment.
The pair is trading at the lows for the day now with the greenback in a comfortable spot, helped by more defensive risk tones as well. European indices are down 0.5% to 1.1% while S&P 500 futures are now down 0.8% on the day currently.
A drop below the 1.1400 mark is a key technical development, paving the way for the potential to dive towards the 1985 lows close to 1.0500. Such a stark move may not materialise but sentiment dictates that the pound should brace itself for a steep drop once traders shake off support at around 1.1400.
That said, there is still the Fed and BOE meetings to consider this week and those will be the key drivers for what will happen next for cable. On the balance of things, the bias favours the dollar as the Fed remains much more hawkish than the BOE. However, much has been priced in for the FOMC meeting already and we will have to see if Powell can offer any further hawkish cues or if there will be a ‘sell the fact’ play in the aftermath.
Well, the BOE side of the equation is not without its downside risks for the pound either so to speak. Policymakers have been less hawkish overall and we are already likely to see just a 50 bps move this week as compared to most other aggressive central banks these days – which are hiking by 75 bps. If there are any hints of a further divide in among policymakers (see the votes), that might drive added pressure on sterling moving forward.
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