GBP/USD has been bearish for more than a year and in September we saw a crash which sent this pair to 1.03 lows as UK gilt yields kept surging. But, the situation stabilized after the intervention from the Bank of England and the GBP has been improving since then.

The USD weakness in the last two months has helped the buyers as well and GBP/USD reached 1.2150s late last week, after US manufacturing PMI fell in contraction, which raised odds for the FED to start slowing down with rate hikes. Although, we have heard some hawkish comments from the FED this week, so nothing is for certain and the USD has gained some momentum.

Buyers failed to reach the 200 daily SMA (purple) and the price has been reversing down in the last several days. So, this might be the beginning of a larger bearish move in this pair. The US consumer confidence came out slightly better than expected, although it is still cooling off.

US November Consumer Confidence

• November consumer confidence 100.2 vs 100.0 expected
• Prior was 102.5
• Estimates ranged from 98.0 vs 103.9
• Present situation 137.4 vs 138.9 prior
• Expectations 75.4 vs 78.1 prior
• One-year inflation expectations 7.2% vs 6.9% prior
• Jobs hard-to-get 13.0% vs 12.7% prior

The present situation number fell sharply in the previous report, in October, and continued to fall; meanwhile the expectations number remains in recessionary territory below 80. The spread between the two remains wide and the reflects the Fed’s difficult position. Everything is pointing to a slowdown in activity/inflation but how hard do they continue to press on the brakes until it actually materializes? The problem is that if they press too hard for too long, they’ll manufacture an unnecessary recession.

GBP/USD Live Chart