Pound volatility continues

The British pound has rebounded in Monday trading. In the North American session, GBP/USD is trading at 1.3916, up 0.80% on the day.

Pound takes back 1.39 level

The US dollar soared last week against the major currencies, and the pound was hit hard, falling 2.14%. The pound dropped below the 1.38 line and suffered its worst week since September 2020. The catalyst for the pound’s sharp descent was the FOMC meeting, at which the Fed brought up the timeline for rate hikes in its dot plot.

The US dollar ended the week with strong gains, after Fed member James Bullard said that the Fed might have to raise rates in 2022 rather than 2023. Comments from Fed members are having a significant impact on US dollar movement, and investors are keeping a close eye on Fed member John Williams, who will speak at an event on Monday.

The sharp drop in the pound last week put it in oversold territory, which has helped the pound record a strong rebound on Monday. I expect GBP/USD to settle down as we get closer to the Bank of England policy decision on Thursday. The BoE will have to address the jump in inflation in May, and will likely say that higher inflation is transitory and will not cause the bank to change its dovish monetary policy. The Federal Reserve was singing the same hymn after the last two inflation reports, before its shook up the markets with a shift in policy. It’s very unlikely that we will see a repeat performance from the BoE, but investors should be prepared for a more hawkish message from the bank, which could lift the pound.

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GBP/USD Technical Analysis

  • There is resistance at 1.4024. Higher, there is resistance at 1.4249
  • On the downside, there is a key monthly support level at 1.3648. Below, there is support at 1.3648

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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