- GBP/USD takes offers to refresh multi-day low amid broad US Dollar strength.
- Improvement in UK sentiment fails to defend Cable buyers amid British recession woes.
- Mostly firmer US statistics, hawkish Fed talks exert downside pressure on Pound Sterling.
- BoE’s Bailey bears more pressure than Fed’s Powell as Jackson Hole closes in.
GBP/USD bears are on full steam while refreshing the 10-week low around 1.2550 heading into Friday’s London open. In doing so, the Cable pair respects the broad US Dollar strength ahead of the central bankers’ showdown at the annual Jackson Hole Symposium, as well as ignoring the upbeat sentiment data flashed at home.
GBPUSD short-term retreats as it awaits progress at Jackson Hole annual meeting pic.twitter.com/wQSAcW9Tvy
— Tammy (@AcbiiC54840) August 25, 2023
GfK Consumer Confidence for August in the UK recovered to -25.0 from -30.0 versus -29.0 anticipated early on Friday in Asia. This marked the biggest improvement in Britain’s private consumer sentiment indicator since April. However, it’s important to keep in mind that the decline in UK retail sales and PMIs has previously exacerbated the country’s recession problems, allowing pound sterling bears to ignore the mid-tier statistics.
On the other hand, upbeat details of the US Durable Goods Orders for July and firmer mid-tier activity data, as well as employment clues, allowed the Fed policymakers to remain hawkish and fuel the US Dollar Index after it reversed from 11 weeks on Wednesday. Among the key Fed hawks, former St. Louis Federal Reserve President James Bullard was the first to underpin the US Dollar’s strength with his hawkish remarks. “The reacceleration could put upward pressure on inflation and thus makes it impossible for the Fed to start cutting rates anytime soon,” said Fed’s Bullard in an interview with Bloomberg. While Bullard was hawkish, Federal Reserve Bank of Philadelphia President Patrick Harker teased an end of rate hike trajectory whereas Boston Federal Reserve President Susan Collins defended a “higher for longer” bias for rates.
Gold is poised to recover from losses over the past four weeks ahead of the Federal Reserve chairman's speech at the Jackson Hole symposium.
The precious metal is showing resistance despite gains in the U.S. dollar (USD). Dovish U.S. jobs data lifted the U.S. dollar (USD),… pic.twitter.com/lRbdNV4Ugu
— Emily (@CFA__Emily) August 25, 2023
It’s important to note that the US Dollar Index (DXY), which had increased the most in a month to renew the multi-day top the day before, has now reached a new high since June 7 at 104.28 as of press time.
Elsewhere, a light calendar and cautious mood ahead of Fed Chairman Jerome Powell’s speech also help the Greenback to remain firmer and drown the GBP/USD price. While portraying the mood, S&P 500 Futures remain depressed around 4,385 after falling the most since December 2022 the previous day, while the US 10-year Treasury bond yields reverse the previous pullback from the highest level since 2007, up two basis points (bps) to 4.25% by the press time.
Looking ahead, Fed’s Powell needs to defend the hawkish policies and rule out rate cuts to defend the US Dollar bulls. However, Bank of England (BoE) Governor Andrew Bailey has a tougher task than Powell as he not only needs to rule out the rate cut bias but also push back against the UK recession concerns to defend the Pound Sterling.
Asian markets sank Friday as a mini rally came to a juddering halt ahead of a keenly awaited speech by Federal Reserve boss Jerome Powell later in the day, with traders increasingly worried the bank will hike interest rates further.
— Inquirer (@inquirerdotnet) August 25, 2023
The four-month-old horizontal support zone, which is currently immediate resistance near 1.2570-90, was clearly broken to the downside, giving the GBP/USD bears hope. Before aiming for the 200-DMA support at about 1.2400, the downside must first have confirmation from the early-June swing high of about 1.2545.