Pound Sterling (GBP) Analysis
GBP Maintains Bleak Outlook – Comments from BoE Governor Bailey
The ECB’s version of the Fed’s Jackson Hole Economic Symposium took place last week, seeing a number of influential central bankers making an appearance. Jerome Powell stole the show as far as markets were concerned as he opened the door to rate hikes into 2023, maintaining lofty rate hike expectations and stoking demand for USD[5].
As far as the Bank of England (BoE) is concerned, Governor Andrew Bailey reiterated concerns around the slowdown in growth alongside an anticipated rise in inflation ahead. Bailey warned that the Bank would act more forcefully in the event inflation persists. The depreciation of the pound worsens the current cost of living squeeze in the UK for imported goods.
GBP/USD Technical Levels Considered
GBP/USD approached and respected the significant 1.2000 level, once more – which remains a major level to monitor over the medium term. Support levels beyond 1.2000 appear at 1.1685 which is the 2016 low and the 2020 low of 1.1410.
Drivers of sterling appreciation are few and far between which means any upside movement in GBP/USD is likely to emanate from a retracement in USD. Such a scenario could play out this week as we trade into Q3 after any H1 and Q2 rebalancing – which tends to see dollar appreciation. Resistance appears at 1.2250 and 1.2400.
GBP/USD Daily Chart
Source: TradingView, prepared by Richard Snow[6]
The weekly chart highlights the importance of the 1.2000 level, which has only seen two previous significant
