The British pound retreated slightly on Tuesday as the strong recovery took a breather. The GBP/USD pair declined to a low of 1.2580, which is slightly below this week’s high of 1.2660. This price is still about 3.68% above the lowest level this month.
US dollar crawls back
The main reason why the GBP/USD pair retreated was the relatively stronger US dollar. The dollar index rose by 0.25% as market volatility rose. This increase came as the recent decline took a breather.
Are you looking for fast-news, hot-tips and market analysis?
Sign-up for the Invezz newsletter, today.
Recent data from the United States painted a picture of an economy whose recovery is under pressure. For example, last week, housing numbers showed that new and existing home sales dropped by more than 10% in April as demand dried up.
Other data showed that industrial production has eased while inflation has jumped to the highest point in over 40 years.
The economic weakness could persist as the Federal Reserve continues its tightening policies. The bank expects to keep hiking interest rates by 0.50% in the next three meetings and then move to 25 basis points increments.
The GBP/US also slipped after th relatively weak mortgage data. According to the Bank of England (BOE), the number of mortgage approvals declined from 69.53k in March to 65.97k in April. This decline was the lowest it has been in months and was worse than the median estimate of 69.0k.
In the same period, mortgage lending dropped to £6.44 billion to £4.12 billion while net lending to individuals fell from £8.3 billion to £5.5 billion. These numbers signal that the country’s economy has started slowing down as the BOE continues its rate hikes.
Looking forward, the GBP/USD pair will react to the upcoming meeting between Jerome Powell and President Biden. The latest consumer confidence data will have an impact.
GBP/USD forecast
The hourly chart shows that the GBP/USD pair has been in a strong bearish trend in the past few hours. It has managed to move below the ascending trendline shown in grey. This line connected the lowest levels since May 18th.
The pair has also moved slightly below the 25-period moving averages while the Relative Strength Index (RSI) has moved below the oversold level. Therefore, the pair will likely keep falling as bears target the 23.6% Fibonacci retracement level at 1.2545.
Where to buy right now
To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:
- Etoro, trusted by over 13m users worldwide. Register here >
- Capital.com, simple, easy to use and regulated. Register here >
*Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.
Source: https://invezz.com/news/2022/05/31/gbp-usd-forecast-sterling-drops-below-an-important-support-level/