- The US dollar strengthened against other major currencies after signals from the minutes of the Federal Reserve’s latest meeting hinted at the future pace of US interest rate cuts in the new year, amid expectations of a reaction to Trump’s policies.
- As a result, the GBP/USD pair quickly fell to the 1.2320 support level, close to an 8-month low.
- In the same session yesterday, the pound dollar tried to recover upwards, but its gains did not exceed the resistance level of 1.2494.
Factors putting pressure on the pound
Selling pressure on the pound rose as a stronger US dollar overshadowed high borrowing costs in the UK, which are nearing a 27-year high, according to foreign exchange trading and trusted trading platforms. In addition, concerns over US trade policy added to the pressure, as CNN reported that US President Donald Trump may declare a national economic emergency to justify imposing sweeping tariffs on allies and adversaries.
Earlier, Trump rejected proposals for more moderate tariffs and insisted he would not scale back his trade policy.
On the UK 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 British bond yields rose, outpacing gains in U.S. Treasury yields, the pound struggled to find support against a stronger dollar, according to market trading.
Trading Tips:
The US Dollar remains strong and may remain so for some time, so be prepared to risk-free sell the Dollar Pound from any upside level.
British government plans weaken sentiment towards the pound
Financial markets will be waiting for an important speech by the British government’s finance minister in the coming period, and as expected, they may focus on new cuts in public spending instead of tax increases. The minister plans to highlight his financial rules to reassure investors and companies about his business with the UK economy, and will also confirm that the new UK government will prioritize stability and will not consider easing budget guidance. Overall, Britain was among the hardest hit by the rout in global bond markets amid investor concerns about public debt levels. As is well known, a sharp rise in government bond yields threatens to absorb the slim 9.9 billion pound ($12.2 billion) margin Reeves left behind after she announced 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 continue its downtrend as the pair finds resistance at the descending trend line connecting its highest levels since mid-November last year. According to the performance, the 100-day simple moving average is below the 200-day simple moving average, which confirms that the stronger path is a downtrend or that selling is likely to gain more strength than a reversal. Also, the 100-day simple moving average coincides with the trend line to add more strength as a ceiling.
In this case, the GBP/USD price may fall to the downside targets specified by the Fibonacci retracement tool. Meanwhile, the 38.2% level is at 1.2416 and then the 50% level is in line with the recent low 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 at 1.2174. Meanwhile, the stochastic indicator is trending lower to show that there is bearish pressure, and the oscillator has enough 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 looking to take over.
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