- GBP/USD sees fresh selling on Friday and gives back a significant portion of the previous day’s gains.
- Domestic issues continue to weigh on the British pound and act as a headwind for the pair.
- Expectations for an aggressive rate hike from the Fed lift the dollar to a new 20-year high and contribute to the selling bias around the pair.
- Investors are now waiting for the NFP monthly employment report from the United States to get a new boost.
The pair GBP/USD has attracted fresh selling near the 1.2055 area on Friday and has now reversed much of the positive movement of the previous day. The intraday drop has accelerated at the beginning of the European session and has dragged the to a new daily low, getting closer to the 1.1900 level again.
The pound sterling received a bit of a boost on Thursday, after Boris Johnson announces his resignation as British Prime Minister and put an end to the recent political drama at 10 Downing Street. The market reaction, however, turned out to be short-lived, as Johnson’s departure was almost a certainty and widely priced in by the markets. In addition, other domestic issues continued to act as a headwind for the pound sterling, which together with a new wave of purchases around the US dollarput further downward pressure on the GBP/USD pair.
Investors continue concerned that the British Government’s controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union in the midst of the cost of living crisis. In addition, the Bank of England is expected to take a gradual approach to raising interest rates amid growing recession fears, further weakening the GBP. By contrast, the June 14-15 FOMC meeting minutes, released on Wednesday, reinforced expectations for faster monetary policy tightening and continued to support the US dollar.
Indeed, those responsible for monetary policy emphasized the need to fight inflation, even if it meant a slowdown in the economy, and indicated that another rate hike of 50 or 75 basis points was likely at the July meeting. Aside from this, the prevailing cautious sentiment in the markets pushed the safe-haven dollar to a new two-decade high, further contributing to the GBP/USD intraday slide. Market participants are now awaiting the monthly NFP employment report in the US, to be released later at the start of the American session.
GBP/USD technical levels
Source: Fx Street
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