British Pound sticks to losses vs firmer USD as Fed-BoE divergence favors bears
The GBP/USD pair struggles to capitalize on Friday's goodish rebound from the 1.1335 area, or its lowest level since July 30, and attracts fresh sellers at the start of a new week.
The British Pound (GBP) continues to struggle against a stronger US Dollar (USD) as the Federal Reserve's (Fed) hawkish stance diverges from the Bank of England's (BoE) cautious approach, benefiting the USD. The GBP/USD pair trades around the 1.3375 region, down nearly 0.15% for the day, and is expected to decline further. The Fed raised interest rates for the first time in three years, with officials anticipating at least one more hike this year, while the BoE maintained steady rates.
Geopolitical tensions, such as Houthi attacks on Saudi sites and Iran's stance on the Strait of Hormuz, also favor the USD. Analysts at Danske Bank note that the BoE's decision to hold rates steady triggered some GBP weakness. Technical analysis shows the pair under pressure below the 100-day Simple Moving Average and the 50.0% Fibonacci retracement, suggesting rallies may be capped by these overhead levels.
Immediate support is at the 61.8% Fibo. retracement at 1.3344, with further support at the 78.6% level at 1.3254. Traders will await speeches from FOMC members and developments from the Middle East crisis, as well as a meeting between US President Trump and Chinese President Xi Jinping.
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