- The Bank of England’s bleak economic forecast weighed on the British pound and limited advances.
- Aggressive Fed rate rise bets and recession worries supported the USD and drew new selling.
- A stronger US inflation print can add to the pair’s uncertainties.
GBP/USD fundamental forecast
At the London session, GBP/USD is hovering at 1.23365, with a 0.06% increase so far.
The Bank of England’s gloomy economic forecast hinted that the current rate rise cycle might be coming to an end.
One important thing to mention here is the Bank of England boosted interest rates to their highest level since 2009 while also warning that the economy was on the verge of a recession. It was regarded as a significant element that worked as a headwind for the British pound and limited the GBP/USD pair.
In the Asian session, the British Retail Consortium (BRC) published Like-For-Like Retail Sales, which were -1.7% lower than expected at -1.6%.
Greenback in green
On Monday, the US dollar hit a record 20-year high as risk-off sentiment fueled by fears about the Federal Reserve’s capacity to handle rising inflation bolstered the greenback’s safe-haven appeal.
The Fed hiked rates by 50 basis points last week to cut inflation without tipping the economy into a recession, and a strong employment report on Friday reinforced expectations for further rate rises.
A drop in Treasury
The 10-year US Treasury yield dipped on Tuesday morning but remained around 3%, as inflation worries remained. The benchmark 10-year Treasury note yield declined six basis points to 3.0164%. The 30-year Treasury bond yield fell seven basis points to 3.1322%.
Key data releases from the GBP
On the GBP docket, we don’t have anything significant for today. Investors will look at the GDP ratings for March on Thursday.
Key data releases from the US
From the US, today we have Fed Williams, Bostic, Waller, and Kashkari speeches. More inflation estimates will be available to investors later this week in the shape of the consumer and producer price indices.
What’s next to watch for GBP/USD?
Expectations of quick rate rises in the US and severe Covid-19 lockdowns in China have fueled concerns about a slowing global economy and a possible recession. This offering benefited the safe-haven buck and drew new selling in the GBP/USD pair.
GBP/USD technical analysis: in a downward trajectory
GBP/USD has gained some pace today and has increased by 0.06%. The pair is way below its 100-day moving average on the daily chart, and the RSI is around 40. At the time of writing, the pair is trading at 1.23365.
GBP/USD is now hitting the 1.2336 level. A fall below 1.2317 will bring the pair towards the 1.2290 support level. If the pair falls below this level again, it will challenge the next support level, 1.2260.
On the upside, the pair can go towards the next resistance level, around 1.2350. A break over 1.2405 will pave the door for a test of the following resistance level of 1.2478.