GBP/USD plunges below 1.2150 on risk-on ahead of BoE’s decision
- GBP/USD falls for the second straight day, as sellers hold 1.2200, alongside a risk-on impulse.
- Broad US dollar strength keeps the greenback afloat against most G10 currencies.
- Fed officials hawkish commentary bolstered the buck, a headwind for GBP/USD.
- The Bank of England (BoE) is expected to hike rates on the August 4 interest rate decision.
The British pound losses ground and falls during Wednesday’s US session by almost 0.26%. Higher US Treasury yields, “hawkish” commentary by Fed officials, and an improvement in sentiment are headwinds for the GBP/USD.
The GBP/USD is trading at 1.2146, down after hitting a daily high at 1.2207, just above the 50-day EMA, but buyers unable to hold, left the major exposed to selling pressure, so the GBP/USD dived towards a daily low at 1.2100.
GBP/USD weighed by risk-on mood, buoyant US dollar
European and US equities are trading in the green. US data from the Institute for Supply Management revealed that July Non-Manufacturing activity, also known as Services PMI, surprisingly exceeded expectations, rose by 56.7, vs. estimations of 53.5, and higher than June’s 55.9. Data showed consumers shifting from goods to services, as the US ISM Manufacturing report depicted signs of slowing down.
Meanwhile, Fed officials remain crossing wires. San Francisco’s Fed Mary Daly commented that hiking 50 bps “would be reasonable to do in September,” but it would depend on data. She added that if inflation remains higher, a “75 bps hike would be more appropriate.” In the meantime, Richmond’s Fed President Thomas Barkin said that he said that recession fears are inconsistent with the labor market growing nearly 400K a month, with a 3.6% unemployment rate.
Earlier, the St. Louis Fed James Bullard commented that he wants to get the Federal funds rate (FFR) to 3.75-4.00% by year’s end while adding, “We’re going to move inflation back to 2% over time.”
On the UK side, final S&P Global Services and Composite PMIs for July. The former fell to 52.6 vs. 53.3 estimated, while the latter slid to 52.1 vs. 52.8 preliminary. UK’s stagflation fears keep rising while GBP/USD traders prepare for Thursday’s Bank of England (BoE) monetary policy decision, where the “old lady” is expected to raise rates by 50 bps to 1.75%.
What to watch
The UK economic docket will feature the BoE monetary policy decision alongside the S&P Global Construction PMI. Across the pond, the US calendar will feature Initial Jobless Claims, alongside further Fed officials crossing wires.
GBP/USD Key Technical Levels