British Pound (GBP) Latest: GBP/USD at Risk of Sharp Fall if Support Breaks
GBP price, Brexit news and analysis:
- GBP/USD is close to an important support level. If it breaks, the pair will be at its lowest level for two months and further falls would be on the cards over the next couple of weeks.
- This weakness comes amid moves towards a second UK lockdown, negative interest rate talk, ongoing concerns about Brexit and risk-off sentiment in the markets overall.
GBP/USD at risk of further decline
GBP/USD is hovering close to a support line connecting the September 11 low at 1.2762 and Monday’s low at 1.2775. If that support fails to hold on a closing basis, the pair will be at its lowest level since July 24 and further weakness to the July 14 low at 1.2480 would be a possible target over the next couple of weeks.
GBP/USD Price Chart, Daily Timeframe (July 8 – September 22, 2020)
Chart by IG (You can click on it for a larger image)
The decline in GBP/USD follows moves towards a second coronavirus lockdown in the UK, with Britons told to work from home if they can, and pubs and restaurants to close at 10pm from Thursday. This will come amid persistent concerns about a possible move by the Bank of England to negative interest rates and the continuing lack of progress in the ongoing talks on a post-Brexit relationship between the UK and the EU.
Bank of England Governor Andrew Bailey reiterated Tuesday that the Bank has looked very hard at the scope to cut rates further, including negative interest rates.
GBP is suffering too from risk-off sentiment in the markets on fears of a broad second lockdown in Europe, pressure on banking stocks after reports of financial institutions allegedly moving illicit funds, delays to the proposed US fiscal stimulus program and the approaching US Presidential election.
In addition, Federal Reserve Chair Jerome Powell will this session begin the first of three appearances before the US Congress – hearings that will likely concentrate on the central bank’s response to the Covid-19 pandemic.
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--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.