- The US dollar gained against other major currencies after signals from the minutes of the latest Federal Reserve meeting hinted at the future pace of US interest rate cuts in the new year, along with anticipation of the reaction to Trump's policies.
- As a result, the GBP/USD pair plummeted rapidly to the support level of 1.2320, near its 8-month low.
- In the same session yesterday, the pound dollar attempted to rebound upwards, but its gains did not exceed the resistance level of 1.2494.
Factors Pressuring the Pound
According to forex market trades and reliable trading platforms, selling pressure on the pound dollar increased as the stronger US dollar overshadowed high borrowing costs in the UK, which are nearing their 27-year high. In addition, concerns about US trade policies added to the pressure, as CNN reported that US President Donald Trump may declare a national economic emergency to justify imposing comprehensive tariffs on allies and adversaries.
Previously, Trump has rejected suggestions of more moderate tariffs and has insisted he will not scale back his trade policy.
On the British side, investors expect the Bank of England to cut interest rates by around 50 basis points this year, despite inflation remaining above its 2% target. Even as UK bond yields have risen, outpacing gains in US Treasury yields, the pound has struggled to find support against a stronger dollar, according to market trading.
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Trading Tips:
The US dollar remains stronger and may remain so for a while, so be ready to sell the pound dollar from any upward level without risk.
UK Government Plans Weaken Sentiment Towards the Pound
Financial markets will be awaiting an important speech by the British government's finance minister in the coming period, and as expected, it may focus on new cuts to public spending instead of tax increases. The minister plans to emphasize its financial rules in order to reassure investors and companies about its dealings with the British economy, in addition to that, it will confirm that the new British government will prioritize stability and will not consider any easing of budget guidelines. In general, Britain was among the most affected by the defeat in global bond markets due to investor concerns about public debt levels. As is known, the sudden rise in government bond yields threatens to absorb the small margin of 9.9 billion pounds ($ 12.2 billion) that Reeves left after announcing her first budget as Chancellor last October.
Technical Analysis for the GBP/USD pair today:
According to recent trades, the GBP/USD pair seems poised to resume its downward trend, as the pair finds resistance at a downward trendline that has connected its highest levels since mid-November of last year. According to the performance, the 100-day simple moving average is below the 200-day simple moving average, confirming that the stronger path is the downward trend or that selling is likely to gain more strength than a reversal. Also, the 100-day simple moving average coincides with the trendline to add more strength as a ceiling.
In this case, the GBP/USD price may decline to the downward targets specified by the Fibonacci correction tool. Meanwhile, the 38.2% level is located at 1.2416, then the 50% level is in line with its recent lows at 1.2370. Stronger selling pressure could drag the pair to the 61.8% level at 1.2323 or the 76.4% level at 1.2266. technically, the full extension is located at 1.2174. Meanwhile, the Stochastic indicator is trending lower to show that there is bearish pressure, and the oscillator has plenty of room to fall before reaching the oversold zone to signal exhaustion. Also, the RSI is trending lower without reaching the overbought zone, suggesting that sellers are keen to take over.
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