British Pound Bucks US Dollar Strength as FOMC Rattles Markets. Will GBP/USD Rally?

British Pound, GBP/USD, US Greenback, Fed, FOMC, Treasuries – Speaking Factors

  • The British Pound held agency in opposition to a hawkish Fed lifting USD
  • Increased yields hit tech shares within the FOMC assembly minutes aftermath
  • Sterling might be gaining momentum. Will GBP/USD break larger?

The British Pound has proven resilience in current classes in opposition to a US Greenback being fuelled by a Federal Reserve delivering extra hawkish information, fanning Treasury yields larger.

The December Federal Open Market Committee (FOMC) assembly minutes had been launched within the US session and confirmed that members expect to tighten coverage at a sooner tempo than beforehand anticipated.

Markets now count on the primary hike to be in March and the top of the asset buy program to be a lot sooner and a discount within the total stability sheet was mentioned.

The benchmark 10-year Treasury yield is buying and selling near 1.72%, an 8-month excessive. The two and 5-year bonds are buying and selling at post-pandemic highs close to 0.84% and 1.44% respectively.

All this has seen demand for US {Dollars} surge, most notably on the expense of AUD, CAD, NOK and NZD within the Asian session. The GBP, CHF, EUR and JPY have fared higher immediately.

The sterling has been considerably supported by Gilts seeing larger yields. The ten-year bond opened the yr yielding 0.97% earlier than buying and selling close to 1.10% in a single day.

Bitcoin was hit onerous within the US session, down over 5%, to the touch a low close to USD 45,500.

The upper yield atmosphere has continued to see the tech sector come underneath stress with the Nasdaq falling over 3% within the money session.

In keeping with a report from Goldman Sachs, hedge fund publicity to tech corporations relative to S&P 500 names at the moment are at their lowest stage ever.

Korea’s tech primarily based Kosdaq index is seeing related losses however Hong Kong’s Dangle Seng Tech index is much less impacted after falling 4.5% yesterday.

The raise in yields has seen actual charges rise and this has undermined gold and silver. Crude oil stays regular with WTI buying and selling slightly below USD 77 a barrel after hitting a 6-week excessive of USD 78.58 a barrel.

After the UK PMI print immediately, the US will see financial knowledge on commerce, jobs, manufacturing unit orders and sturdy items orders, in addition to the ISM providers index.

GBP/USD Technical Evaluation

The height in June final yr of 1.4251 was the very best for GBP/USD since early 2018.

Since then, it has been caught in a descending development channel. It isn’t removed from breaking the higher facet of the channel. It at the moment dissects at 1.3625 and would possibly provide resistance.

Resistance is also on the earlier highs of 1.3599, 1.3835, 1.3913, 1,3982 and 1.4251.

GBP/USD has moved above its’ quick and medium time period easy shifting averages (SMA) however it’s struggling to clear the 100-day SMA for the second. A decisive break above it might see additional bullish momentum unfold.

On the draw back, help is likely to be on the earlier lows of 1.3431, 1.3174 and 1.3161.


Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the feedback part beneath or @DanMcCathyFX on Twitter


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