GBP/USD drops back to 1.3230 ahead of BOE inflation report hearings
- USD recovery gathers pace.
- UK data weighs.
- Eyes on BOE’s inflation report hearings.
The GBP/USD pair erases most gains and prints fresh session lows of 1.3231 after the sentiment around pound was hit by a bigger-than-expected rise in the UK public finances.
GBP/USD headed to key support near 1.3215
In the European session, the spot stalled its recovery mode and witnessed a sharp reversal from 1.3267 highs, after the US dollar recovery regained momentum amid a rebound seen shorter-duration Treasury yields.
The latest leg lower in Cable is mainly on the back of the divergent monetary policy outlooks between the Fed and BOE coming back to the fore ahead of the BOE inflation report hearings and Fed minutes release.
Should the inflation report hearings indicate any expectations of cooling price pressures, the BOE rate hikes outlook will receive a severe blow. Meanwhile, a Dec Fed rate hike is penciled in, with the US economy on a solid footing.
The bears are now fighting back control and look to send the rates lower to test the next key support near 1.3215 levels, the confluence of 5 and 50-DMA, below which floors will open up for a test of 1.32 handle, with downbeat UK public sector net borrowings data collaborating to the downside.
GBP/USD Technical Levels
Jim Langlands at FX Charts noted: “On the topside, resistance will again be seen at 1.3260, above which 1.3275/1.3300 would find good offers although I doubt we see it much above here today. On the downside, support will be now seen at 1.3185, 1.3150 and at 1.3135 ahead of the rising trend support low at 1.3100.”