GBP/USD Tests the 200 SMA As Construction Improves but Remains in Recession
GBP/USD has been bearish since July as the USD started gaining momentum, pushing the price close to 1.20. But, a bottom has formed for this pair and it has made a strong bullish move in the last few days despite the UK economy heading into a recession.
GBP/USD has been on a downtrend for a few months but following a consolidation period in October and the strong upward move at the end of last week, this pair may be turning bullish and pushing above moving averages. Buyers have also pushed the price over 1.22, indicating that this pair does not want to drop below 1.20. GBP/USD has been in a downward trend since July, but it appears to be turning upward after sellers failed to break below the 1.20 level. Buyers have gained control, driving the price above 1.22 as well as moving averages.
The rise in US bond rates due to global worries has supported the USD, but we have witnessed a return to 4.60% this week after the 10-year notes climbed above 5% last week. For months, this pair had been falling, reaching 1.2040 in early October before rebounding. The USD has been supported and pushed higher by economic data, with the pair falling just below 1.21 earlier this week, but moving averages have functioned as resistance, causing the highs to fall. Despite stabilizing for the majority of October, this pair is indicating a desire to resume its upward trend.
Following the Bank of England (BoE) which left the policy rate steady at 5.25% by a 6-3 decision, a cautious approach to future policy tightening, noting that risks to inflation predictions were tilted to the upside due to the uncertainty caused by events in the Middle East. Although the BoE event had little influence on the GBP, broad-based USD depreciation allowed GBP/USD to rise on Thursday.
On Thursday, this pair gained positive momentum and reached a new 10-day high over 1.2220. The pair lost traction early Friday and entered a consolidation period around 1.2200, with investors refocusing their focus to US data releases.
UK Construction Rport for October
- UK Construction PMI Actual 45.6 points
- Forecasts were for a 46.0 point reading
- September Construction PMI was 45.0 points
Britain’s construction industry suffered a second month of shrinkage in October as higher borrowing costs hit house-builders and worries about the weak economy put clients off new investment, a survey showed on Monday.
GBP/USD Live Chart
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