Friday, December 02, 2022

GBP/USD broke above 1.1000 level due to USD weakness

GBP/USD broke above 1.1000 level due to USD weakness

  • GBP/USD rose to a daily high of 1.1074.
  • Initial US jobless claims declined, boosting the prospect of further Fed rate hikes.
  • GBP/USD Technical Analysis: Test of 50% Fibonacci level, once passed, a recovery to 1.1210 can be seen; Otherwise it may retest 1.0538.

GBP/USD Global stocks advance for third consecutive day as sell-off continues. However, on the currency side, a slight improvement in sentiment keeps most G8 currencies higher against the dollar, despite upbeat US economic data.

At the time of writing, the GBP/USD pair is trading at 1.1024, up 1% from its opening price, having reached a daily low of 1.0759.

GBP/USD corrected after mixed US economic data.

In the US session, US economic data was mixed, with GDP for the second quarter at -0.6%, according to road analysts’ estimates. Notably, the government revised GDP data from the fourth quarter of 2016 to the fourth quarter of 2021, showing that the economy’s recovery from the Covid-19 pandemic was stronger than initially reported.

At the same time, the US Department of Labor reported initial jobless claims for the week ended September 24, which are down 215,000 to 193,000, showing the resilience of the labor market, despite being driven by a tougher stance by the Fed.

Meanwhile, Fed officials have stuck to their harsh rhetoric. Cleveland Fed Chair Loretta Meester said she did not see a crisis in US financial markets when asked about what was happening in Britain. He acknowledged that the actions of the Bank of England promised to stabilize the bond market.

Furthermore, Meester said he continues to see inflation as the main problem of the economy and said he sees no reason to slow down. Additionally, he expects rates to peak at around 4.6%.

For his part, St. Louis Fed Chairman James Bullard said the Fed will have to hold rates “for much longer” and said real rates in positive territory are an “encouraging sign”; However, he acknowledged the heightened risks of a recession, while the unemployment rate at 4.5% “will remain healthy for the economy.”

In the background, the US Federal Reserve raised rates by 75 basis points to 3.25% in September. The November meeting has a 70% chance that there will be another increase of the same amount, taking interest rates to the 4% limit.

Earlier, UK Prime Minister Liz Truss said she was ready to make a “controversial” decision, doubling down on her economic plan, which was set by her finance minister, Quasi Quarteng.

GBP/USD Price Analysis: Technical Outlook

Over the past three days, GBP/USD has formed some base against the US Dollar, however today’s rally is testing 1.1047, the 50% Fibonacci retracement level traced from the previous swing high of 1.1738, towards a lower low, Which is the following at 1.0356 of the year. Therefore, if the pair breaks above, the next resistance level to test will be the Fibonacci 61.8% at 1.1210. On the other hand, if it fails to break it, there is a possibility of a drop to 1.0884, 38.2% Fibonacci, and the September 28 low at 1.0538.

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