The Pound Sterling vs. US Dollar: A Week of Turbulence
The Pound Sterling sellers stood their ground against the US Dollar’s dominance, resulting in the GBP/USD pair experiencing a seventh consecutive weekly loss, plummeting to 1.2630.
US Dollar’s Strength Amidst Trump Trade Optimism
The USD surged on the wave of optimism surrounding President-elect Donald Trump’s victory, reaching a yearly high against major currencies. Trump’s proposed policies, including tax cuts and trade tariffs, fueled expectations of inflationary pressures, leading to higher interest rates and boosting the Greenback, US stocks, and Treasury bond yields.
The continued buying interest in the USD pushed the GBP/USD pair to its lowest level since July at 1.2630. The US Federal Reserve’s cautious stance post-election further supported the Greenback’s strength.
Key Factors Driving the Market
- Fed Chair Jerome Powell’s remarks on inflation and interest rates
- US Consumer Price Index (CPI) and Producer Price Index (PPI) data for October
- Market expectations shifting on Fed rate cuts
Bank of England’s Prudent Remarks
Despite the Bank of England’s positive outlook on interest rates, the Pound Sterling struggled to capitalize on it due to the USD’s bullish momentum. BoE policymakers highlighted the importance of gradual rate adjustments based on economic indicators.
Looking Ahead: UK Inflation Data and Global PMIs
The upcoming week will focus on UK CPI inflation data and global PMIs, which will influence market expectations and central bank policies. BoE and Fed speeches, along with US Jobless Claims data, will provide further insights into the economic landscape.
Technical Outlook for GBP/USD
The GBP/USD pair faces downside risks with the RSI in negative territory. Key levels to watch include 1.2665 and 1.2550 as potential support levels. A break below these levels could lead to further downside momentum.
On the upside, reclaiming the 200-day SMA at 1.2819 is crucial for any meaningful recovery, with the 21-day SMA at 1.2908 acting as a potential resistance level.
Overall, the GBP/USD pair remains volatile, driven by economic data releases and central bank policies.