Gbp/usd Plummets To Mid-1.1100s, Lowest Since 1985 Amid Relentless Usd Buying

Gbp/usd Plummets To Mid-1.1100s, Lowest Since 1985 Amid Relentless Usd Buying

  • Trade Ideas
  • Forex
  • 2022, 23 September

Brief:

  • GBP/USD comes under renewed selling pressure and drops to a fresh low since 1985.
  • The BoE’s 50 bps rate hike on Thursday and recession fears weigh on the British pound.
  • The USD hits a fresh 20-year peak and further contributes to the downward trajectory.

The GBP/USD pair prolongs its recent bearish trend and weakens further below the 1.1200 mark, hitting its lowest level since 1985 during the early European session on Friday. The downward trajectory picks up pace following the release of flash UK PMIs and drags spot prices to mid-1.1100s.

A 50 bps rate hike by the Bank of England on Thursday disappointed market participants anticipating a more aggressive policy tightening. Furthermore, UK Prime Minister Liz Truss' energy relief package for households and businesses could help slow inflation and has set the stage for a dovish pivot from the UK central bank. This turns out to be a key factor that continues to undermine the British pound amid the looming recession risk.

The market fears were further fueled by the disappointing release of the flash UK PMI prints, which showed that business activity in both manufacturing and services sectors contracted in September. The US dollar, on the other hand, hits a fresh two-decade high and remains well supported by a more hawkish stance adopted by the Federal Reserve. This further contributes to the heavily offered tone surrounding the GBP/USD pair.

Meanwhile, the latest leg down witnessed could further be attributed to some technical selling below the 1.1200 round-figure mark. This might have already set the stage for an extension of the downward trajectory, though extremely oversold conditions on short-term charts warrant some caution for aggressive bearish traders. Market participants now look forward to the US flash PMI prints for some impetus ahead of Fed Chair Jerome Powell’s speech.

Suggestion:

Sell below 1.1245 for 1.1150 and 1.1120

Else

Buy above 1.1245 for 1.1280 and 1.1310

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