Trading around the 1.30 mark has been a trend for the GBP/USD currency pair in the previous few weeks. On Friday, amidst the rising concerns that the instability and uncertainty in the UK’s economy will eventually see the Bank of England’s (BoE) policymakers deciding in favor of a rate cut at the end of the month, Cable lost traction again and was seen trading below the 1.30 level.
BoE Governor Mark Carney Hints At An Imminent Rate Cut At The End Of January
With the rising complications regarding Brexit and multiple policymakers including BoE’s governor Carney hinting at an imminent rate cut, the currency pair has started the new week on Monday on the back foot. As per the analysts, recent statements from the UK’s finance minister, Sajid Javid, who highlighted the weakness in the UK’s economy, along with the dire consequences that the country is likely to face in an event that PM Johnson’s deadline of December 2020 turns out to be shorter than needed for a broader trade deal with the European Union, technical specialists are now expecting further downside in Cable in the upcoming weeks.
In a recent announcement, the Prime Minister declared that certain restrictions are likely to be in place for low-skilled migrants following the December deadline for the transition period. The experts responded highlighting the complications such a move may create for a broader EU-UK trade deal. Subsequently, the probability of a harder Brexit than previously thought continues to rise.
GBP/USD To Test The Crucial Support At 1.2985 Level
Another reason, as per the technical analysts for the downbeat inclination in the GBP/USD currency pair is the optimism circling the U.S economy that has fueled further strength in the U.S dollar index. All in all, however, with macroeconomic factors like a probable rate cut from the BoE in play and the post-phase 1 trade deal (U.S and China) scenario, markets remain sluggish as traders wait for things to unravel. Similar sluggishness, as per the analysts, may also be seen in the Asian stocks.
Apart from the BoE’s decision, Brexit related headlines along with the employment data to be announced on Tuesday is expected to be the major market mover for GBP/USD this week. The technical analysts highlight the 1.2985 region to be crucial support for Cable. Since the start of November, an upward sloping trendline has been formed around this level, a daily close below which will open the way for the currency pair to hit its next support near the 100-day moving average at 1.2800.