British pound holds up after BoE recalibrates amid war uncertainties. Will GBP/USD go lower?

British Pound, GBP/USD, BoE, BoJ, Yen, JPY, Crude Oil, AUD – Talking Points

  • The British pound has changed little today after Bailey’s comments undermined it
  • The Bank of Japan has been active in the face of an increasingly weakening yen
  • The uncertainty over the war in Ukraine is making central bankers think. Where to for GBP/USD

The British pound has held steady today after a sell-off on Monday in the wake of comments from Bank of England Governor Andrew Bailey suggesting that rate hikes may not be as aggressive as previously expected.

Currencies were calm during the Asian session, with the yen regaining some of Monday’s lost ground, but still close to a 6-year low against the US dollar.

The Bank of Japan was again active in the debt market today and implemented yield curve control, with the 10-year Japanese government bond remaining below 0.25%.

Government bonds elsewhere in the world have maintained their high yields, with the benchmark 10-year government bond yielding just under 2.50%.

APAC stocks followed Wall Street’s lead with modest gains in most markets. Mainland China was the exception with the Shanghai shutdown sapping supplies there.

Crude oil was also impacted by the close, with both WTI and Brent futures contracts falling about 1.5%. Gold is stable near US$1,922 bbl.

Ahead of the Australian federal budget to be released later in the day, local retail sales performed well above expectations for February, coming in at 1.8% instead of 0.8% expected. The easing of Covid-19 restrictions appears to have been the main factor.

The Australian budget is unlikely to be a market mover with leaks revealing money for roads, dams and airports. Some consumer sweeteners include cuts in fuel taxes, cuts in some alcohol taxes, and incentives for first-time homebuyers. The Australian dollar has fallen below 75 cents.

Looking ahead, the US will see consumer confidence figures and a few Fed speakers will cross the thread.

The full economic calendar can be viewed here.

GBP/USD Technical Analysis

GBP/USD still has several downtrend lines. A recent rally above the 21-day simple moving average (SMA) could not be sustained and it could continue to resist, currently at 1.31656.

Resistance may also be at the pivots and recent highs of 1.32727, 1.32983, 1.34388 and 1.34862.

On the downside, support could be near the recent lows of 1.30656 and 1.29999.

GBPUSD CHART

Graphic Cmeasured in TradingView

— Written by Daniel McCarthy, strategist for DailyFX.com

Use the comments below to contact Daniel or @DanMcCathyFX on Twitter

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