April 25, 2024

GBP/USD Rate Has Fallen Below 1.3500 Due To Brexit Worries

The Pound is trading near 1.3500 against the Dollar, as the US Dollar loses ground against a backdrop of falling bond yields.

Concerns about Brexit and the political situation in the United Kingdom could limit the Pound’s upside potential. Before the Fed’s choice, traders were still in waiting and seeing mode.

An Overview Of The Technical Aspects

GBP/USD CHART Source: Tradingview.com

On the four-hour graph, the 200-period simple moving average (SMA) forms evolving support at 1.3460. The duo could come under reinvigorated bearish pressure if this level is turned into resistance again.

On the negative side, the price aligns with the Fibonacci retracement of the most recent uptrend at 1.3410, representing the next bearish goal.

The first point of opposition is situated at 1.3500 (psychological level), followed by 1.3530 (physical level) (Fibonacci 38.2% retracement). It is unlikely that the pair will be ready to end above the latter on a daily basis in the near future.

An Overview Of The Fundamentals

On Tuesday, the Pound/Dollar clawed back a tiny amount of its weekly losses and was trading quite calmly around 1.3500 on Wednesday.

Economists at ING predict that the pair will remain stable above the 1.3500 point following the USD’s vulnerability following the Fed’s announcement later in the day.

On Monday, the Pound-to-Dollar exchange rate fell by more than 100 points, reaching 1.3439, its lowest level in more than three weeks.

However, despite the fact that the pair appears to have entered a pullback phase early Tuesday, it continues to remain under 1.3500 and demonstrates no persuasive signs of a significant rebound.

On Monday morning, the frantic flight to safety resulted in the British Pound losing value. The FTSE 100 Index in the United Kingdom is up over 1% on Tuesday, but this increase does not yet indicate a favorable shift in risk perception in the country.

It is expected that investors will avoid the Pound due to the ongoing war between Russia and Ukraine and evidence of a global economic slowdown and political worries in the United Kingdom.

As an additional indication of safe-haven movements taking over the markets in the second part of the day, the Dow Jones Industrial Average futures are off between 0.3% and 1%.

Meanwhile, although an initial report on Downing Street parties held during lockdowns is expected, the office of Prime Minister Boris Johnson said on Monday that there would be another party to commemorate Johnson’s birthday in June 2020.

The Conference Board will issue its Consumer Sentiment Index for January later on Wednesday. Unless this data comes in significantly better than anticipated, market sentiment will likely remain gloomy, with the Dollar continuing to outperform its risk-sensitive counterparts.

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