Home GBP/USD Price Analysis: Pound Hits 2-Month Lows After Powell

GBP/USD Price Analysis: Pound Hits 2-Month Lows After Powell

  • The head of the Fed suggested that rates might need to rise further.
  • The US dollar index rose by more than 1%.
  • Data revealed that British house prices unexpectedly increased in February.

Today’s GBP/USD price analysis is bearish. On Tuesday, the pound fell to a two-month low versus the dollar after a Bank of England (BoE) policymaker warned that it would be exposed to other central banks’ outlooks. Soon after, the head of the Federal Reserve suggested that interest rates might need to rise further.

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According to BoE rate-setter Catherine Mann, the pound could weaken if investors have yet to fully factor in aggressive Fed and European Central Bank (ECB) statements.

Mann’s remarks were made just a few hours before Fed Chair Jerome Powell testified before Congress. Powell’s comments indicated that the ultimate level of interest rates was probably going to be higher than previously anticipated. This caused the US dollar index to rise by more than 1%.

Money markets expect the BoE interest rate to peak in September at 4.75%. After ten consecutive rate rises starting in late 2021, it is now at 4%.

Moreover, traders are placing a 93% chance of a rate increase of 25 basis points when the central bank meets to make policy decisions on March 23. The likelihood of a 50-bps increase is now 7%. Before Powell’s speech on Tuesday, there was no possibility factored in that the BoE could increase rates by more than 25 basis points.

The pound momentarily surged to a one-week high in early London trading when data revealed that British house prices unexpectedly increased in February.

GBP/USD key events today

Investors will continue paying attention to Powell’s testimony which will continue today. There will also be an employment report from the US that will show the state of the labor market.

GBP/USD technical price analysis: Bears break out of consolidation

The 4-hour chart shows GBP/USD collapsing after breaking out of its range area. The price trades far below the 30-SMA with the RSI in the oversold region. This indicates extreme bearish momentum.

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The price had been trading within a range with support at 1.1925 and resistance at 1.2125 until bears managed to break below the range support. It is approaching the 1.1801 critical level and might pause before going lower or pulling back.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.