Ahead of the UK budget, the GBP/USD currency pair declines below the 1.2100 barrier
GBP/USD is being pulled away from the one-month high it reached on Tuesday due to several factors.
A higher USD and wagers that the BoE could suspend its rate-hiking cycle put some pressure.
Investors are now looking for new energy in the UK budget and significant American macro announcements.
Following an early rise to the 1.2180 area, the GBP/USD pair comes under some fresh selling pressure and falls lower for a second straight day on Wednesday. During the first half of the European session, spot prices decline under the 1.2100 level, with bears now attempting to deepen the overnight retracement decline from the 1.2200 round figure, or a one-month high.
Expectations that the Bank of England (BoE) will halt its rate-hiking cycle, which in turn acts as a headwind for the GBP/USD pair, are to blame for the British Pound’s relative underperformance. According to a report released on Tuesday by the UK Office for National Statistics, annual increase in average total pay, including bonuses, fell from 6% in December to 5.7% in the three months leading up to January. When bonuses are excluded, salary growth slowed from 6.7% to 6.5%. This is regarded as the first indication that UK wages are declining, and considering the bleak economic outlook, should allow the central bank to adopt a cautious approach.
The US Dollar, on the other hand, draws support from a further rise in the US Treasury bond yields, bolstered by reviving bets for at least a 25-bps rate hike by the Federal Reserve at its meeting on March 21-22. The expectations were fuelled by the US CPI report released on Tuesday, which indicated that inflation isn’t coming down quite as fast as hoped. Adding to this, a fresh leg down in the US equity futures, amid concerns over a banking crisis in the US, provides a strong boost to the safe-haven buck. This, in turn, supports prospects for an extension of the GBP/USD pair’s retracement slide from the 1.2200 round figure.
Despite skyrocketing inflation and a cost-of-living issue, traders appear hesitant to put bold wagers and may instead prefer to wait for the UK government’s Spring Budget. In addition, the US economic calendar, which includes the release of the Producer Price Index (PPI), monthly Retail Sales data, and the Empire State Manufacturing Index, may give the GBP/USD pair some support later in the early North American session. The fundamental environment described above, however, appears to be heavily skewed in favour of bears and indicates that the path of least resistance for spot prices is downward.
GBP/USD TECHNICAL ANALYSIS DAILY CHART:
GBPUSD is currently trading in a down channel.
GBPUSD is currently trading above 5&20 SMA.
RSI is in buying zone which suggests bullishness and Stochastic is suggesting a downtrend.
GBPUSD resistance is at 1.21308 & its immediate support level is 1.20550
HOW TO TRADE GBP/USD
GBP/USD is trading in a down channel; currently, it has broken its previous day’s low, and it is trading at an important support zone, if it breaks the level then, we can see a further fall.