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During yesterday’s trading session, the GBP/USD exchange rate rose after US Federal Reserve Chairman Jerome Powell said that US financial conditions have adjusted to what looks like a great place for the bank since the announcement of the huge US non-farm payrolls numbers last Friday . The rebound gains for the sterling pair against the dollar GBP/USD reached the 1.2095 resistance level after the price decline towards the 1.1962 support level, its lowest since a month before Powell’s statements.
The dollar was widely sold after US Federal Reserve Chairman Powell told the Economic Club of Washington that continued increases in US interest rates are still necessary and that a restrained level of prices will be maintained for “a considerable period” but that financial conditions are now in a better position Much more than it was.
This comes after the US non-farm payrolls report for January shed light on the US labor market and pushed federal funds rate futures to raise interest rates by 5% to 5.25% in line with the FOMC’s December forecast. Powell added to David Rubenstein, president of the Economic Club of Washington and a former fellow at The Carlyle Group. However, he also warned that it was likely to take “well into next year” before inflation eased back closer to the 2% target and warned that “we may have to raise interest rates more than is priced in” if inflation The exchange rate is currently on track for the renewed rise in inflation between them.
The postponement of the return of personal consumption expenditure inflation to the 2% target is the price increases in the non-residential part of the service sector – the basic local economy, and in other words – “there is still a long time to go” in order to reduce it from the latest level of 5%. But Powell was also upbeat about financial conditions including bond yields and the recently weakened U.S. dollar exchange rate. There were also choice words regarding the recent conflict in Congress over the infamous US government debt ceiling, which recently led to the US Treasury Department resorting to “extraordinary measures” as a means of maintaining day-to-day government spending.
Today’s sterling vs. dollar expectations:
- Despite the recent rebound, the general trend of the GBP/USD currency pair is still downward.
- The stability around and below the psychological support level of 1.2000 supports this.
- I still expect that the GBP/USD currency pair is a candidate for further collapse to the bottom and may face support levels of 1.1875 and 1.1755 In order according to the performance on the daily chart below.
- The factors of the strength of the American dollar are still the most prominent and in contrast the sterling has more pressure factors despite the Bank of England’s strict policy.
On the other hand, moving towards the resistance levels 1.2160 and 1.2300 will be important for the control of the bulls and at the same time renewed opportunities to sell. The currency pair does not expect any important and influential economic data today except for statements by some policy members of the American Central Bank.
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