British Pound as Dollar Rebounds Amidst U.S Govt Shutdown
The British pound slides versus the U.S. dollar amidst the American government shutdown. GBP/USD declined after failing to clear 1.3464, and the US dollar registered gains amid the ongoing US government shutdown.
Also, political jitters from France caused UK bonds to slide as the French government was getting into deeper trouble. The French Prime Minister, Sebastian Lecornu, quit hours after naming his picks for top roles.
The dollar traded near session highs late in the European time on Tuesday. The French crisis has not been resolved, and the policy mix advocated by the new head of the Liberal Democratic Party and soon-to-be prime minister continues to weigh on the yen.
Sterling continues to trade quietly on the back of a light UK economic calendar in the week. UK Gilts underperformed yesterday, but sterling avoided the turmoil that hit the euro and yen. It set a new session high in late North American turnover on Tuesday, near $1.3490.
The exchange rate is virtually moving sideways, zig-zagging between a lower end near $1.3330 and an upper end near $1.3590, the latest FX signal revealed. A closer look at Sterling price action shows GBP/USD trading within an embedded descending channel off the September high.
Price is now approaching initial support at the 61.8% retracement of the August rally – looking for a possible reaction off this mark in the days ahead. GBPUSD continues to trade within the range set. A move above $1.360 is constructive, represents 50% retracement for the decline since the September 17 Fed rate cut.
The next retracement (61.8%) is near $1.3570. The daily momentum indicators look poised to turn higher. Sterling retreats below 1.3450 after failing to clear key resistance; diverging Fed–BoE outlooks cap downside risks.
The economic docket on both sides of the Atlantic remains scarce, yet Federal Reserve (Fed) officials are grabbing traders’ attention. FX traders said divergence between the Fed and the Bank of England favours further upside in GBP/USD.
Money market traders expect the Fed to cut rates at the October meeting, with odds standing at 94% while the Bank of England is expected to keep interest rates unchanged, with odds for a 25-bps cut at 10%.
The GBP/USD technical picture shows the pair is neutral to downward-biased, even though it remains above the 200-day SMA. Nevertheless, a daily close above 1.3500 could sponsor a leg up towards October 1 at 1.3527. A breach of the latter will expose the 1.3600 figure.
Several Fed officials speak today, including Governor Bowman, who has hinted at the need for quicker rate cuts. The US sells $90 bln of six-week bills today and $58 bln three-year notes.
Gold reached a new record high near $3977.50 but has seen profit-taking pare earlier gains. $200bn Export Market- Niteon Launches Neobank for African Manufacturers
