Shortly after the publication of our commentary yesterday, GBPUSD made a sharp turn to the south.
Three events precipitated this swing. One, a correction in equities. Dow, for example, shed nearly 900 points over the past two sessions. We have mentioned previously that a ‘risk off’ sentiment tends to drag Sterling lower. (Risk-off means bearish mood.) The second point is Brexit. In particular, traders are nervous that EU’s draft proposal is hitting a brick wall in Whitehall. Shortly after its publication yesterday, the British prime minister rejected EU’s proposal outright, saying that EU’s demand on Northern Ireland threatens the integrity of the United Kingdom. The last point is Powell’s hawkish speech on Tuesday, which attracted speculative inflow into the Dollar.
Moreover, a series of weak macro headlines today are dampening market sentiment towards Sterling. UK’s Manufacturing PMI figure shows a positive but weakening trend. And, Nationwide‘s house price growth declined in February.
So what will GBPUSD do over the next few days? As things stand, Sterling is weak against the Dollar. It will probably weaken further due to the above factors. But we have to point out that the slide from 1.4150 is becoming oversold. There is lateral support at 1.3750 and 1.3500. We watch for rebounds at these levels.
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Jackson has over 15 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.