Bearish View as Global Risks Rise

The GBP/USD pair will likely react to the state of the banking sector. Last week, two banks in the US – Silvergate Capital and Silicon Valley Bank – collapsed. 

• Sell the GBP/USD pair and set a take-profit at 1.1950.
• Add a stop-loss at 1.2150.
• Timeline: 1 day.

• Buy the GBP/USD and set a take-profit at 1.2125.
• Add a stop-loss at 1.1950.

The GBP/USD price moved sideways on Monday morning ahead of a relatively busy week in the US and UK. It was trading at 1.2034 on Monday, a few points below last week’s high of 1.2112.

The GBP/USD pair will have numerous catalysts this week. In the UK, the Office of National Statistics (ONS) will publish the latest jobs numbers this week. The data will come on Tuesday when the agency will publish the latest jobs numbers.

Economists believe that the labor market continued to strengthen in January as the unemployment rate remained at 3.8%. These numbers are important because of the importance of their impact on the actions of the Bank of England (BOE).

The other important catalyst from the UK will be the upcoming UK Spring budget. Chancellor Jeremy Hunt will deliver a statement that combines some tax hikes and some tax breaks for companies. According to Bloomberg, he will provide tax breaks worth about £11 billion by replacing investment allowance with a temporary measure. Corporate taxes are expected to jump from 19% to 25% in April.

The other important data will be from the United States, where the Bureau of Labor Statistics (BLS) will publish the latest consumer inflation data on Tuesday. Economists believe that inflation remained above 6%, signaling that the Fed has more work to do in the near term.

Recent developments mean that inflation remains stubbornly high. For example, gasoline prices have remained above $3 in the US. At the same time, there are signs that the prices of other items like air tickets have continued rising in the past few months.

The GBP/USD pair will likely react to the state of the banking sector. Last week, two banks in the US – Silvergate Capital and Silicon Valley Bank – collapsed. As such, there are worries about contagion in the sector. If this happens, we could see the US dollar rise as investors rush to safety.

The GBP/USD tilted downwards as the Silicon Valley Bank crisis continued. It remains slightly below the descending line shown in green. The pair sits at the strong pivot reverse level of the Murrey Math Lines. It has also moved slightly above the 25-day and 50-day moving averages.

Therefore, the pair will likely continue falling as sellers target the next key support level at 1.1950. The stop-loss of this trade will be at 1.2100.