British Pound Under the Pump Ahead of BoE and Fed Rate Decisions. Will GBP/USD Go Lower?

[MongiIG]

BRITISH POUND, GBP/USD, US DOLLAR, BOE, FED, CRUDE OIL, COAL, AUD, HANG SENG - TALKING POINTS

• The British Pound slipped further today against USD as hikes are imminent
• APAC equities were mixed and commodities are lower, dragging AUD down
• All eyes are on central banks later this week. Will the BoE turn GBP around?

The British Pound leaked lower again today even though the Bank of England are expected to raise rates for the third time in this cycle by 25 basis points.

Commodity markets that have opened for the week are mostly in the red so far. At the time of going to print, Brent crude oil futures contracts are trading below US$ 111 bbl and the WTI contract is under US$ 107 bbl.

In the Asian session, all of the commodity-linked currencies are lower as a result, including AUD, CAD, NOK and NZD. The Aussie was the hit hardest due to an announcement from China that it will ramp up coal mining efforts.

It’s a touch ironic that the AUD is so much lower, as the Chinese authorities had banned the importing of Australian coal some time ago as a result of a diplomatic stoush.

It was only when Chinese authorities were in need of energy last year that they allowed the release of previously seized Australian coal.

The Japanese Yen also fell ahead of the Bank of Japan meeting later in the week, where it is expected to keep rates on hold.

This is in contrast to the Fed meeting on Thursday. It is anticipated to lift rates by 25 basis points.The US Dollar and the Euro were main gainers today.

Hong Kong and Chinese equities took a hit today while Australian and Japanese indices were in the green.

A collection of Chinese companies listed in the US continue to be marked down as the Securities Exchange Commission (SEC) cited them as not being compliant with US regulations on disclosure requirements.

The Hang Seng Tech index was notably weaker, down over 8% at one stage today. The lockdown of Shenzhen due to Covid-19 also contributed to negative sentiment.

Treasury bond yields are higher, with the 10-year note threatening the recent peaks, trading near 2.05%, up from Friday’s close of 1.997%.

Looking ahead for today, there’s not much data out of any note. The markets will be focused on central bank meetings later in the week with the Bank of England, the Fed and the Bank of Japan headlining.

The full economic calendar can be viewed here.

 

GBP/USD TECHNICAL ANALYSIS

Sterling made a four-month low today and could test support at the October 2020 low of 1.28538.

An extension of a descending trend line currently intersects near there and break lower might see an acceleration of bearish momentum.

The 10, 55 and 260-day simple moving averages (SMA) are all above the price and have a negative gradient which may suggest bearish momentum is evolving.

On the topside, resistance could be at the pivot points and previous highs of 1.32727, 1.34388, 1.34862 and 1.36435.

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com. 14th March 2022