GBPUSD Continues Lower, BOE Sees Weakening UK Consumer

GBPUSD was bullish for two months until the middle of June, but has changed course as the Bank of England starts to give dovish signals. The highs are getting lower for this forex pair, as the economic data from the UK softens, while inflation is heading toward normal levels.

Bank of England Governor Andrew Bailey

The British pound faced pressure primarily due to the Bank of England’s policy decision, which conveyed some dovish signals and left the possibility of a rate cut in August. Additionally, the disappointing UK Services PMI data released last Friday added to the pound’s weakness, although this was somewhat mitigated by the US PMI figures.

GBP/USD Chart Weekly – The Stochastic Indictor Is OverboughtChart GBPUSD, H4, 2024.06.26 23:28 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

Market sentiment has worsened, negatively impacting risk assets and the pound. On the daily chart, GBP/USD dropped to the 1.26 lows yesterday, closing the day at this level. The trend now appears quite bearish following the BoE’s dovish stance and weak UK PMI data. The momentum is supporting the sellers right now, as technical and fundamental indicators show. Therefore, the GBP/USD path of least resistance is downwards. Sellers are likely aiming for the price to fall further to reinforce their bearish outlook, targeting the 1.25 level next.

The BOE Remarks in Its Financial Stability Report – 27 June 2024

  • The counter-cyclical buffer is maintained at 2%, reflecting the BOE’s approach to manage financial risks without significant adjustments.
  • There is a need for improved risk management in the private equity sector to reduce existing vulnerabilities and enhance stability.
  • The global financial risk environment remains “broadly unchanged” from Q1, indicating persistent risks and challenges in the international markets.
  • The adjustment to higher interest rates is still ongoing, suggesting that the full impact of rate changes has yet to be realized.
  • Market prices are still susceptible to a sharp correction, highlighting potential volatility and the need for caution in financial markets.
  • Many UK households are under significant pressure due to higher living costs and rising interest rates, posing risks to household financial stability.
  • UK businesses are “broadly resilient” to the current economic outlook, showing an ability to withstand economic pressures despite challenges.

GBP/USD Live Chart

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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