- The pound dropped after the death of Queen Elizabeth.
- Powell restated the Fed’s commitment to tame inflation.
- The UK might face a balance of payments crisis due to the sterling’s decline.
The GBP/USD outlook dropped against the dollar following Queen Elizabeth’s death, who had ruled Britain for the longest time and served as its symbol for seven decades.
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In remarks made at a Cato Institute conference, Powell stated that the Fed is “fully committed” to bringing inflation down and must continue working until the job is done.
“I am not convinced that the dollar’s highs are in place yet,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“Powell did not add anything new to what he said in Jackson Hole or to what (Fed Vice Chair Lael) Brainard said yesterday, but I expect the dollar to consolidate ahead of CPI (consumer price index) next week,” he added.
According to US rate futures, there is an 87% chance that the Fed will raise interest rates by an additional 75 basis points at its meeting this month, bringing the Fed funds rate to 3.0% to 3.25%.
The fall in the pound’s value versus the dollar to levels last seen in 1985 has raised concerns about a sharp decline in the value of British assets and a balance of payments crisis. Sterling has lost nearly 10% of its value since early June. On Thursday, it fell once more to below $1.15.
GBP/USD key events today
The weekly Commitments of Traders report from the Commodity Futures Trading Commission gives an overview of the net pound positions held by speculative traders in US futures markets.
GBP/USD technical outlook: Bulls eyeing the 1.16025 resistance level
The 4-hour chart shows the price trading above the 30-SMA and the RSI above 50, pointing to strong bullish momentum. Sellers have been in charge of this market, and they were able to push the price below 1.14506. However, buyers took over, showing that the 1.14506 level was strong support.
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Since then, the price has broken above the 30-SMA, with bulls creating strong bullish candles. If the price can successfully retest the 30-SMA and continue pushing higher, it will likely break above the 1.16025 resistance and start making higher highs and higher lows.
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Saqib Iqbal
