FUNDAMENTAL BACKDROP FOR GBP/USD
The US employment news from Friday continues to boost the dollar index, which in turn prevents the pound to dollar from recovering. Contrary to the Bank of England (BoE), whose governor, Andrew Bailey, predicted that UK inflation would continue to decline, market players are pricing in a higher Fed Funds peak rate for 2023. Of course, it is too early to make such sweeping predictions, but should they come true, the GBPUSD is in for more decline.
According to statistics from Halifax, there was some modestly encouraging news this morning for the UK housing market as prices have stabilized following a 4-month decline. The lowest growth in house price increases in three years has dropped to 1.9% YoY. Given the rising rates and the BoE’s recent disclosure that mortgage approvals are currently at their lowest level since the 2008–2009 financial crisis, it is doubtful that demand will increase anytime soon.
The markets are anticipating a hawkish tone from the Fed Chair to support last week’s employment data, which may give the already strong dollar even more support.
TECHNICAL PERSPECTIVE
While the RSI is in overbought zone, we are getting close to the 200-day MA, which might offer some support, around the 1.1950 region. We may be in for a pullback if the GBPUSD finds support around the 200-day MA before prices continue to decline toward a potential test of the 100-day MA at the 1.1800 mark.