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GBPUSD Weaker As Market Looks To Fed, Bank of England

GBPUSD Weaker As Market Looks To Fed, Bank of England

David Cottle, Analyst


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GBPUSD Chart, Analysis, and Prices

  • GBP/USD awaits interest rate calls from both central banks
  • Rates are expected to rise yet again
  • Will banking stresses moderate central bank hawkishness?
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The British Pound slipped against a generally stronger United States Dollar in Europe on Tuesday as a recovery in US bond yields gave the greenback a general lift.

Both currencies face home central bank monetary policy meetings in the next two days, with the US Federal Reserve kicking matters off on Wednesday and the Bank of England following up on Thursday. Both are expected to raise borrowing costs again, but the market is wondering whether recent stresses in the banking sector might lead to a moderation in their assessments of likely increases to come.

At face value, this speculation might well be a little overdone. Both central banks’ chief mandates are to fight inflation. And, as inflation continues to run far above target in both countries, higher interest rates may not be a matter of many choices in either London or Washington.

Still, news that Swiss lender UBS AG was to buy troubled national rival Credit Suisse did give markets some relief on Monday, which carried over into those higher bond yields. Still, if the Fed is more moderate than expected this week, those yields may yet come under pressure again.

European stock markets opened quite strongly on Tuesday, with London’s bank-heavy FTSE 100 no exception.

GBP/USD has been rising steadily since September last year, as markets price in more scope for rate rises in the United Kingdom than across the Atlantic. This year some very modest improvements in the UK economic outlook have also supported the pound to some extent, although the country still faces huge challenges ranging from that rampant inflation through to industrial unrest and ongoing Brexit trade negotiations.

The State’s reliance on debt was underlined Tuesday by official news that Public Sector Net Borrowing was £16.7 billion ($20.46) in February, The highest level for that month since comparable records began in 1993. This huge figure was largely accounted for by ongoing schemes to help consumers with energy prices.

GBP/USD Technical Analysis

Chart Compiled Using TradingView

GBP/USD clearly remains in an uptrend from the lows of September 2022, but it broke below a quite well-respected uptrend channel back on February 3 and has not managed to regain it since. Indeed, it has now diverged sharply from that channel base.

The bottom of the current channel has only been tested once, when the pair bounced on March 8, but support at the channel base might not be very reliable at this point. It might be better to think of GBP/USD as trading in a broad range between the March 8 low of 1.17971 and the February 14 intraday peak of 1.22495, with a break of either likely to be important for directional cues.

GBP/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 6% -7% -3%
Weekly 26% -7% 3%
What does it mean for price action?
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The Pound is above its 20, 50, and 100-day moving averages, but not drastically so. According to IG data, sentiment towards the pair is very mixed, and it might take a wait until both of those central bank meetings are out of the way this week before a clearer view emerges.

Sterling bears will have their eyes on psychological support at the 1.21 handle, while bulls will try to regain the territory lost in the sharp falls of February 2 and 3, which could see them try to re-take and hold the 1.23780 which now acts as resistance.

--By David Cottle for DailyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.