HUBFX (hubfx.co)
3 min readJun 7, 2023

GBP/USD continues to face downward pressure, extending its four-day losing streak and struggling to recover from intraday lows.

Concerns about the British economy and sluggish markets are allowing bearish sentiment to persist in the Cable pair. Despite a relatively light economic calendar and the pre-Fed blackout period, the US Dollar is battling with bearish sentiment, making it difficult for bullish traders to gain momentum. Political news and discussions surrounding the Federal Reserve and the Bank of England will likely guide traders in their decisions involving Pound Sterling.

At the same time, the US Dollar is showing some strength as it retraces losses from the early Asian session, with the US Dollar Index (DXY) rising towards 104.20. However, overall, the greenback remains indecisive for the day. Market sentiment on the Fed’s future actions is subdued due to the pre-FOMC blackout period for policymakers. There are also concerns that the US government’s bond issuance related to the debt-ceiling deal may trigger a banking crisis, as suggested by the Financial Times (FT), which is contributing to a more risk-averse market environment and supporting the rebound of the US Dollar.

Additionally, interest rate futures indicate a nearly 20% probability of a rate hike in June, but the likelihood of a 25 basis points rate hike in July has recently increased. This scenario appears to favour sellers of Pound Sterling. The downward pressure on GBP/USD can be attributed to disappointing economic data from the United States released on Monday, as well as previously dovish comments from Federal Reserve officials ahead of the pre-Fed blackout period.

On the other hand, cautious sentiment prevails ahead of UK Prime Minister Rishi Sunak’s visit to the US, and there are concerns that the British economy will face the challenges of high inflation and limited productivity growth.

Looking at market indicators, the 10-year Treasury yields remain subdued around 3.67% despite a slight recovery, while the two-year yields have increased slightly to 4.50%. S&P 500 Futures are showing modest gains, following the performance of Wall Street.

In terms of technical analysis, there is a two-week ascending support line, along with a stable RSI (14) line and diminishing bearish signals from the MACD, challenging bearish momentum around the psychological level of 1.2400 for GBP/USD.

Moving forward, GBP/USD traders will closely monitor political headlines related to the UK and US, as well as discussions regarding the next moves by the Bank of England (BoE) and the Federal Reserve (Fed).

Global stock markets saw modest gains on Tuesday as investors assessed the sustainability of the recent rally, while bond yields ticked higher as expectations of U.S. rate cuts diminished due to persistent price pressures. Wall Street remained positive, with the S&P 500 reaching a nearly 10-month high on Monday. The S&P 500 increased by 0.1%, the Dow Jones Industrial Average remained relatively unchanged, and the Nasdaq Composite Index climbed 0.25%. In Europe, the STOXX 600 index rose by 0.38%, while Asia-Pacific shares outside Japan showed little change according to MSCI’s broadest index. Overall, the MSCI’s global stock index was up by 0.21%. While the positive performance of major stock markets may suggest further upward movement, analysts cautioned against unfounded optimism. On the bond front, the two-year Treasury yield, which is typically influenced by interest rate expectations, rose to 4.5%, while the yield on 10-year notes inched up to 3.7%. Initially, government bond yields eased after a European Central Bank (ECB) survey revealed reduced inflation expectations among euro zone consumers. However, retail sales growth in the UK slowed to a seven-month low due to higher food prices impacting discretionary spending. Conversely, Australia’s central bank increased rates to an 11-year high of 4.1%, potentially influencing other countries’ rate decisions. The upcoming weeks will feature meetings by the U.S. Federal Reserve, the ECB, and the Bank of Japan, which will play a significant role in shaping monetary policy. Market expectations of a pause in the Fed’s rate hikes rose to 82% following data showing sluggish growth in the U.S. services sector in May, compared to 36% the previous week. The U.S. dollar index showed a slight increase of 0.17%, while the euro declined 0.26% against the dollar, the yen remained steady, and the pound remained flat.

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