GBP/USD extends slide below 1.3500 to one-month lows
- The pound remains under pressure after the BoE decision.
- US dollar gains momentum as stocks turn lower and despite a decline in US yields.
- GBP/USD drops almost two hundred pips, heads for third lowers close since December.
The GBP/USD slide was triggered by the Bank of England and more recently reinforced by a rally of the US dollar across the board. Cable broke under 1.3500, reaching at 1.3482, the lowest level in a month. It is falling almost two hundred pips on Thursday, having the worst performance in weeks.
The decision of the Bank of England (BoE) to keep rates and QE unchanged weighed on the pound that lost ground against all its rivals. Governor Baily’s press conference did not alter cable’s sell off. Analysts at Danske Bank see the three rate hike in 2020 (15bp in February, 25bp in May and 25bp in November). “The reason is that we expect the economic recovery will continue (including increasing employment) amid still high inflation.”
More recently, the decline of GBP/USD gained momentum after breaking under 1.3500 and also amid a stronger US dollar. The DXY is up by 0.60%, at 94.45, the highest level since mid-October. At the same time, US yields are falling sharply with the 10-year at 1.52%, near Wednesday’s low.
The outcome of the FOMC meeting so far has not been negative for the dollar. On Friday, the critical Non-farm Payrolls report is due. The consensus point to a net gain in jobs of 425K and the unemployment rate to drop to 4.7%.
Technical levels