English
GBP/USD Reaffirms 2.5-Month Low Near 1.2550 As Fed, BoE Leaders Gird For Jackson Hole Confrontation
GBP/USD accepts offers to reestablish a multi-day low amidst widespread US Dollar strength. In the face of British economic problems, a rise in British sentiment is insufficient to protect Cable buyers. Generally more robust U.S. data and hawkish Fed comments exert downward pressure on the British pound. As Jackson Hole approaches, Bailey is under greater duress than Powell.
Prior to Friday's opening in London, GBP/USD bears are exerting maximum force while testing the 10-week low near 1.2550. In doing so, the Cable pair respects the broad US Dollar strength ahead of the annual Jackson Hole Symposium confrontation between central bankers, while ignoring the upbeat domestic sentiment data.
The August GfK Consumer Confidence for the United Kingdom rebounded to -25.0 from -30.0 versus the predicted -29.0. Indicator of private consumer sentiment in the United Kingdom reached its highest level since April. It is important to note, however, that the decline in UK Retail Sales and PMIs has previously exacerbated Britain's recession troubles, allowing bears to disregard the mid-tier data.
On the other hand, positive July US Durable Goods Orders and mid-tier activity data, as well as employment indicators, enabled Fed policymakers to maintain their hawkish stance and bolster the US Dollar Index after it reversed course for the first time in 11 weeks on Wednesday. James Bullard, the former president of the Federal Reserve Bank of St. Louis, was the first Fed hawk to support the resilience of the US dollar with his hawkish comments. "The reacceleration could exert upward pressure on inflation, making it impossible for the Fed to cut rates in the near future," Fed's Bullard said in an interview with Bloomberg. Patrick Harker, president of the Federal Reserve Bank of Philadelphia, hinted at an end to the rate hike trajectory, whereas Susan Collins, president of the Federal Reserve Bank of Boston, defended a "higher for longer" bias for interest rates.
Notable is the rise of the US Dollar Index (DXY) to a new high since June 07, 104.28 as of press time, after leaping the most in a month to renew the multi-day peak the day before.
A light calendar and a cautious mindset ahead of Fed Chairman Jerome Powell's speech also contribute to the dollar's strength and to the decline in the GBP/USD exchange rate. S&P 500 Futures remain depressed around 4,385 after declining the most since December 2022 the day before, while US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, rising two basis points (bps) to 4.25 percent at the time of publication.
To protect US Dollar supporters, Powell must defend hawkish policies and rule out rate cuts in the future. However, Bank of England (BoE) Governor Andrew Bailey has a more difficult mission than Powell, as he must not only rule out the rate cut bias but also push back against UK recession concerns in order to defend the pound.
Bonus rebate to help investors grow in the trading world!
