Pound Sterling Tumbles Amid Sour Risk Sentiment | Errante
Market Overview
The GBP/USD lost its traction on Friday, slipping to 1.2920 as Greenback extended its recovery. The Dollar Index surged above 104.00, sparked by expectations that Fed will keep rates elevated for longer. BoE kept rates unchanged and maintained a cautious tone. Global risk sentiment remains the key driver as well.
Fundamental Analysis
The GBP/USD price could not hold above 1.3000 despite multiple attempts to find acceptance. The growing concerns about Fed to hold interest rates higher for longer are weighing on the pound. The dollar paused its multi-week losing streak after FOMC meeting and poised to rise further. Fed Chair Powell emphasized that President Trump’s trade policies may exert upward pressure on the inflation while growth can be slowed down. Hence, Fed is reluctant to cut rates.
As per CME FedWatch tool, the FOMC meeting in May is expected to maintain rates while there is 73% probability of a rate cut in June meeting.
On the other hand, the global investors remain on the edge as President Trump prepares to implement reciprocal tariffs from April 02. Such measures will execute equal tariffs on products imported and exported between US and its trading partners. The financial markets are experiencing cautious positioning due to limited risk appetite.
The Pound Sterling has been struggling today against most peers despite a cautious stance taken by the BoE. The central bank kept interest rates unchanged at 4.5% in yesterday’s meeting. Governor Bailey reaffirmed a gradual decline in the rates but also acknowledged economic uncertainty. Out of nine MPC members. Only one member voted for a 25 bps rate cut while rest of the seven members voted to keep rates unchanged, defying market expectations of two votes for a cut. Though the pound managed to escape a sharp decline amid BoE’s cautiousness, it wasn’t enough for the pair to trigger a rally.
On the US side, jobless claims data came slightly better than expected, dropping to 223k against 224k claims. Moreover, existing home sales surged by 4.2% in Feb while Philadelphia Fed manufacturing Index rose to 12.5 against expected 8.5%.
In the absence of any major news ahead, the pair will be largely driven by the US indices and risk sentiment stemming from trade related news.
Technical Analysis
The price action on the daily chart indicates that the 21st March candle broke below the low of the 20th March (a liquidity sweep), but then closed back within the range of the 20th March’s low. This suggests that the market has trapped sellers by breaking the low, collecting liquidity, and then reversing direction. According to price action theory, after a sweep like this, the market often targets the opposite liquidity level — in this case, the highs of the 20th March around 1.29658.
On the H1 timeframe, the sequence of consecutive bullish candles followed by a doji highlights a moment of indecision. This could indicate a pause after a move, possibly forming a base for continuation towards the liquidity above. Doji candles are often seen as consolidation or transitional points in market structure. Combined with the higher timeframe analysis, this supports the idea that the market could make its way back up to the highs of the 20th March.
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