CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

British pound plummets as US dollar roars in risk-off rout

The British pound is in unchartered waters today sinking to new depths; the US dollar is ratcheting higher against every currency so far today and central banks might play a larger role in currencies. Will that impact GBP/USD?

The British pound is trading at levels not seen since the Bretton Woods monetary system was abandoned in 1972. The US dollar continues to trade higher as assets perceived as safe havens are being sought.

Sterling collapsed again on Monday after the mini budget delivered on Friday has the market raising questions of the UK’s financial position after significant tax cuts were announced.

The rapid decent has led to speculation that the Bank of England might be forced to act in some way or another, be it tinkering with interest rates or physically entering the FX market to buy GBP/USD.

It has traded at a low so far of 1.0354 against Friday’s close of 1.0847.

Last week saw intervention by the Bank of Japan when they bought USD/JPY for the first time in 24-years. Today, Japan’s Finance Minister Shunichi Suzuki hit the wires saying, “We’re strongly concerned about speculative moves, and there’s no change in our stance that we’ll respond as needed.”

USD/JPY traded back above 144 on Monday and a move above 145 will be closely monitored by the market for a reaction from the BoJ.

The ‘big dollar’ is strong across the board, making a 20-year high against the Euro.

Equity markets are mostly underwater as recession risks are appearing to be priced in by stock markets. Hong Kong’s Hang Seng and the broader Chinese CSI 300 are slightly in the green after Covid-19 related restrictions have eased somewhat.

Commodities have been caught up the storm with the WTI futures contract is approaching US$ 78 bbl while the Brent contract dipped below US$ 86 bbl. Gold is slightly lower, trading under US$ 1,640.

Treasury yields are 3 – 6 basis points higher across the curve in Asia today.

While data might be a bit thin today, there is a plethora of central bank speakers from the ECB, BoE and the Fed that will be making headlines today.

GBP/USD technical analysis

GBP/USD is in unchartered territory, having never traded this low since the currency was floated in 1972.

Not surprisingly, bearish momentum signals are strong and might indicate further weakness is possible.

A bearish triple moving average (TMA) formation requires the price to be below the short term simple moving average (SMA), the latter to be below the medium term SMA and the medium term SMA to be below the long term SMA. All SMAs also need to have a negative gradient.

Looking at any combination of SMAs, the criteria for a TMA in GBP/USD have been met.

Resistance might be at the break points at 1.1405 and 1.1414.

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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