GBPUSD SHORT on hawkish FED
Updated
Dollar climbs on expectations of a still hawkish Fed
The dollar has been boosted by the release of forecast-smashing U.S. jobs figures, prompting U.S. Treasury yields to soar as a robust labor market coupled with stronger-than-expected print on the Fed’s preferred inflation index earlier in May pointed to the U.S. central bank keeping interest rates higher for longer.
The Fed meets next week and expectations of another rate increase are rising, particularly given the growing hopes the U.S. economy is headed for a 'soft landing' after Congress's approval last week of a debt ceiling deal that averts U.S. default.
The Fed enters its traditional blackout period this week, but there is more data to digest, including the ISM services PMI later Monday, which is expected to point to a still solid rate of expansion.
Bears on the prowl at resistance
GBP/USD started the week off by dropping below 1.24, approaching a two-month low of 1.2306 reached on May 25th, as investors perceive a narrowing interest rate gap between the US and the UK. However, the Pound recovered those losses on the back of the weaker US dollar and data that put the Fed back into the spotlight on a dovish tip.
Technically this leaves GBP/USD in no-man's-land, treading water at the top of a 100-pip box as follows:
The bias is therefore bearish while below the counter-trendline and with in-the-money longs a target for the bears for the sessions ahead. However, a break of the resistance around 1.2450 exposes 1.2500 resistance:1,23500
The dollar has been boosted by the release of forecast-smashing U.S. jobs figures, prompting U.S. Treasury yields to soar as a robust labor market coupled with stronger-than-expected print on the Fed’s preferred inflation index earlier in May pointed to the U.S. central bank keeping interest rates higher for longer.
The Fed meets next week and expectations of another rate increase are rising, particularly given the growing hopes the U.S. economy is headed for a 'soft landing' after Congress's approval last week of a debt ceiling deal that averts U.S. default.
The Fed enters its traditional blackout period this week, but there is more data to digest, including the ISM services PMI later Monday, which is expected to point to a still solid rate of expansion.
Bears on the prowl at resistance
GBP/USD started the week off by dropping below 1.24, approaching a two-month low of 1.2306 reached on May 25th, as investors perceive a narrowing interest rate gap between the US and the UK. However, the Pound recovered those losses on the back of the weaker US dollar and data that put the Fed back into the spotlight on a dovish tip.
Technically this leaves GBP/USD in no-man's-land, treading water at the top of a 100-pip box as follows:
The bias is therefore bearish while below the counter-trendline and with in-the-money longs a target for the bears for the sessions ahead. However, a break of the resistance around 1.2450 exposes 1.2500 resistance:1,23500
Note
After a spectacular run of outperformance since February, UK macro data have generally underwhelmed since mid-May, according to the Economic Surprise Index. Nevertheless, the strong-than-expected data since the start of the year has prompted upgrades to the economic outlook for the current year. Meanwhile, the slower-than-expected moderation in UK inflation in April has raised the odds of a Bank of England (BOE) rate hike this month.BOE hiked its benchmark rate by 25 basis points in May after pausing in April, and the market is pricing in almost four rate hikes by the end of the year, taking the terminal rate to 5.41% from 4.50% currently. The next week bring UK jobs, GDP, and manufacturing output data ahead of the BOE meeting on June 22, which could stir things up a bit for GBP. Until then, the pound could be due for a breather after a spectacular run against some of its peers.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.