- GBP/USD is making a trip downtown on the latest remarks from Federal Reserve governor Powell who has sent the dollar to the heavens and highest levels since late August on the 96 handle.
- Good old-fashioned fundamentals with respect to interest rate differentials driving the market again.
This was the break that the dollar bulls were hoping for with it finally playing catch up with the recent run of upbeat US data and rising US yields. While the pound has otherwise been subject to rather fickle headlines relating to Brexit, cable can finally trade in something factual giving traders clear impetus to short the pair on sound and good old-fashioned fundamentals with respect to interest rate differentials.
Comments from Powell have sparked a broad-based bid in the rally and they came as follows:
- Fed’s Powell: U.S. economy ‘remarkably positive’
- Fed’s Powell: May raise rates past ‘neutral’
- Fed’s Powell: Not really seen any impact yet from trade disputes
“The U.S. 10-year traded as high as 3.18 percent on Wednesday, the highest in seven years, spurred by the surging U.S. economy and a determined Fed. Treasury rates are entering the range of consequence, where higher interest costs will begin to have an economic impact,” Joseph Trevisani, Senior Analyst at FXStreet explained.
Joseph Trevisani also explained earlier that the “healthy growth in ADP employment will keep expectations intact for a robust September employment report on Friday with expectations reaching beyond the 188,000 consensus forecast.”
And with respect to the services data, Joseph notes that the sector continues to drive the U.S. economy to new heights:
“Record levels of business optimism combined with the very strong ADP report, point to a further acceleration in the already robust job market in Friday’s payroll report.”
Analysts at Commerzbank argued that below 1.2785 will imply a retest of the 1.2662 August low. However, RSI is now int the realms of oversold territory but ATR is stretched.