The GBPUSD pair, trading at 1.27081, has dropped to approximately 1.2700 due to fears of a UK recession caused by a surprise 50 basis-point rate hike by the Bank of England and a slowdown in worldwide business activity.
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- GBP/USD falls to around 1.2700 as BoE’s unexpected 50 bps rate hike and slowing global business activity sparks UK recession fears.
The pair currently trades last at 1.27081.
The previous day high was 1.2845 while the previous day low was 1.2726. The daily 38.2% Fib levels comes at 1.2771, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.28, expected to provide resistance.
GBP/USD extended its losses in the late New York session, dropping around 0.30% meanders at around 1.2700, amid growing recession woes in the UK as data showed business activity deceleration. That, alongside an aggressive 50 bps rate hike by the Bank of England (BoE) as a response to stubborn inflation, weighed on the Pound Sterling (GBP). At the time of writing, the GBP/USD exchanges hands at 1.2709.
Wall Street is set to finish the week with losses. Risk aversion surfaced as readings of business activity across Europe and the United States (US), although remaining at expansionary territory, it slowed down, spurring recessionary fears. The US S&P Global Manufacturing PMI plunged to 46.3, below the prior month’s data, while the Services and Composite PMI expanded by 54.1 and 53, but both numbers were below the forecasts.
Chris Williamson, the Chief Economist of S&P Global Market Intelligence, commented, “The overall rate of expansion of business activity in the US remained robust in June, consistent with GDP rising at a rate of 1.7% to put second-quarter growth in the region of 2%.”
It should be said the US economy so far fared well amidst 500 basis points (bps) of rate increases, as shown by growth, housing, and labor market data. However, business activity deterioration could put into play a possible “hard landing,” as the Federal Reserve (Fed) Chair Jerome Powell stressed the need for a couple of interest rate increases.
The US Dollar Index (DXY), a measure of the buck’s value against its peers, advances 0.50%, up at 102.909. US Treasury bond yields continued to drop, capping the GBP/USD’s fall above the 1.2700 figure.
On the UK front, the BoE’s 50 bps rate hike surprised investors. , while market participants show rates in the UK could rise as high as 6%. Even though an interest rate increase usually would boost the country’s currency, recession fears caused a different reaction.
Data-wise, consumer confidence deteriorated, and S&P Global/CIPS PMIs expanded slower, except for Manufacturing. On the positive side, UK retail sales surprisingly rose in May, bolstered by an extra bank holiday. However, it also suggested that most consumers deal with high inflation as they squeeze their spending power.
Technical Levels: Supports and Resistances
GBPUSD currently trading at 1.271 at the time of writing. Pair opened at 1.2748 and is trading with a change of -0.3 % .
| Overview | Overview.1 | |
|---|---|---|
| 0 | Today last price | 1.2710 |
| 1 | Today Daily Change | -0.0038 |
| 2 | Today Daily Change % | -0.3000 |
| 3 | Today daily open | 1.2748 |
The pair remains strongly bullish on the daily timeframe. It trades above its 20 SMA @ 1.2572, 50 SMA 1.2517, 100 SMA @ 1.2342 and 200 SMA @ 1.2069.
| Trends | Trends.1 | |
|---|---|---|
| 0 | Daily SMA20 | 1.2572 |
| 1 | Daily SMA50 | 1.2517 |
| 2 | Daily SMA100 | 1.2342 |
| 3 | Daily SMA200 | 1.2069 |
The previous day high was 1.2845 while the previous day low was 1.2726. The daily 38.2% Fib levels comes at 1.2771, expected to provide resistance. Similarly, the daily 61.8% fib level is at 1.28, expected to provide resistance.
Note the levels of interest below:
- Pivot support is noted at 1.2701, 1.2654, 1.2581
- Pivot resistance is noted at 1.282, 1.2892, 1.2939
| Levels | Levels.1 |
|---|---|
| Previous Daily High | 1.2845 |
| Previous Daily Low | 1.2726 |
| Previous Weekly High | 1.2848 |
| Previous Weekly Low | 1.2487 |
| Previous Monthly High | 1.2680 |
| Previous Monthly Low | 1.2308 |
| Daily Fibonacci 38.2% | 1.2771 |
| Daily Fibonacci 61.8% | 1.2800 |
| Daily Pivot Point S1 | 1.2701 |
| Daily Pivot Point S2 | 1.2654 |
| Daily Pivot Point S3 | 1.2581 |
| Daily Pivot Point R1 | 1.2820 |
| Daily Pivot Point R2 | 1.2892 |
| Daily Pivot Point R3 | 1.2939 |
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