- GBP/USD stabilizes after refreshing all-time low, remains on the bear’s radar.
- Fears of BOE intervention challenge bears amid a light calendar.
- UK Chancellor Kwarteng’s hint of more tax cuts, Labour Party’s criticism of latest stimulus weigh on prices.
- Hawkish Fedspeak, pessimism surrounding the UK economy and broad risk-aversion add strength to the bearish bias.
GBP/USD consolidates intraday losses around the recently flashed record low near 1.0340, as bears fear the Bank of England’s (BOE) intervention. That said, the Cable pair picks up bids to 1.0560 by the press time of Monday’s Asian session.
British Chancellor Kwasi Kwarteng’s signals of more tax cuts were perceived as not helping much as Britain’s Labour Party Leader Keir Starmer termed the UK government’s tax cuts as helping the wealthy people and pledged to reverse the abolition of the top rate of income tax. It should be noted that UK’s Kwarteng also refrained from pushing the Bank of England (BOE) towards defending the Cable and exerted downside pressure on the GBP/USD prices.
“The selloff that followed the release on Friday of the government’s ‘Growth Plan’– a budget in all but name and the biggest tax giveaway in half a century — showed few signs of abating as markets entered a new week, heaping pressure on Prime Minister Liz Truss’s days-old administration,” said Bloomberg.
However, the slump in the prices is too heavy and hence the BOE’s intervention appears imminent, which in turn allows the quote to pare losses.
Even so, the broad risk-aversion wave and the pessimism surrounding the UK economy, mainly due to the Russia-Ukraine woes and the BOE’s late response to the jump in inflation, could keep the GBP/USD bears hopeful.
Recently, UK’s Rightmove said, per Reuters, that Asking prices for British homes advertised rose solidly this month and last week’s cut to property purchase tax announced by finance minister Kwasi Kwarteng could fuel demand further.
While portraying the mood, Wall Street slumped and the yields favored the US dollar to remain firmer, amid the hawkish Fedspeak and rate hike. That said, the S&P 500 Futures print mild losses while the US 10-year Treasury yields add four basis points to 3.74% at the latest.
Moving on, fears of the BOE intervention may restrict GBP/USD moves. However, the bears are likely to keep control. Also important to watch will be Fed Chair Jerome Powell’s speech and the US data.
Technical analysis
GBP/USD bears keep reins unless the pair bounces back beyond the year 2020 low near 1.1410.