September 25, 2023

GBP/USD Cut Down on Daily Loss around 1.3600 In Spite of Brexit and Geopolitical Tensions

Getting Back Up

The GBP/USD trading pair consolidated its intraday loss around the 1.3600 zones by picking up fresh bids as traders of the cable patiently wait for the London open on Tuesday.

GBP/USD price chart. Source TradingView

It was a positive beginning for the pair this week with stricter UK purchasing managers’ index favoring the Bank of England’s hawks. Although the wave of risk-aversion gives a positive beginning of the week also to the US dollar bulls and it weighed in on quotes in the early Asian session. 

The first reading of the United Kingdom’s Manufacturing and Services Purchasing Managers’ Index for February has risen over the market consensus in the most recent reading. Nevertheless, the United Kingdom’s Express media quotes the European Commission’s pointsman on Brexit, Maros Sefcovic, while he portrayed the possible obstacles for the GBP/USD pair and later on probed the bullish investors. The news said that Maros Sefcovic wrecked the hopes of a widely expected EU breakthrough following a high-level meeting in Brussels on Monday, with Britain’s lead Brexit negotiator, Liz Truss.

The Guardian also reported about Brexit, saying that the treasury made an announcement of its plans to release over 10 billion pounds of UK’s infrastructure investments via a post-Brexit sweeping of the entire insurance sector.

On the flip side, the monitoring US dollar index has printed a four-day gain close to 96.15 in the midst of the market risk-off pulse. Market sentiments soared on increasing agitations of a possible Russian military aggression on Ukraine as has been warned by Western powers.

The United Nations Share Concerns

In further developments, the United Nations recently hosted an emergency meeting where Rosemary A. DiCarlo, the UN Secretary-General for Political Affairs, mentioned that the order to send Russian troops to Eastern Ukraine on an alleged peacekeeping operation is regrettable. In addition to existing market fears are the readiness of Western governments to roll out more sanctions on Russia.

While all these go on, equity futures in the United States and Europe maintain a downbeat position, and the treasury yields in the US also dropped by about seven bps to 1.85% recently.

Going forward, Brexit news will now be an influence alongside geopolitics in directing near-term GBP/USD movements. Equally important is the first reading of February’s American Market Purchasing Managers’ Index in the midst of more subtle Federal Reserve statements. 

Michelle Bowman, the Federal Reserve’s Board Governor, said on Monday that it might be too early to say if the Federal Reserve should increase interest rates by either 25bps or 50bps in March. This is in the same path as statements from Charles Evans and John Williams, Presidents of the Chicago Federal Reserve and New York Federal Reserve, respectively.       

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