British Pound (GBP) Forecast: GBP/USD Risks Remain Lower

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GBP Price Analysis & News

• GBP Not Out of the Woods Yet
• Sue Gray Report, Fiscal Talk and BoE Dove in Focus

GBP Not Out of the Woods Yet

A modest reprieve in the Pound after yesterday’s shocking PMI release with Cable once again reclaiming the 1.25 handle amid a helping hand from cross-selling in EUR/GBP. However, GBP is not out of the woods yet, downside risks will remain for the currency. The Sue Gray party-gate report is expected to be released today, which will once again increase political uncertainty. Meanwhile, there is some good news after reports suggest that the UK Chancellor is planning to announce a mini-budget in the face of the cost of living squeeze. In turn, the details will be closely watched in order to gauge whether this can keep GBP supported. My view remains that the Pound will continue to struggle, particularly on the basis that money markets are still far too aggressive on the interest rate outlook for the Bank of England. Thus, GBP is vulnerable to further dovish repricing. Looking ahead, Bank of England External Member, Tenreyro, is scheduled to speak, which will be notable for the Pound, given that Tenreyro has typically leaned on the dovish spectrum of the MPC.

Markets See 4.5 Hikes By Year-End

Source: Refinitiv

On the technical front, short-term resistance resides at the weekly high (1.26), while support sits at 1.24. As it stands, the bias remains a fade on rallies in GBP/USD and as we approach month-end, given the sell-off across US equities, the USD is likely to recoup its recent losses. Additionally, as equities continue to sag, downside in GBP vs JPY and CHF looks to be the path of least resistance.

GBP/USD Chart: Daily Time Frame

Source: Refinitiv

 

 

May 25, 2022 | DailyFX
Justin McQueen, Strategist