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Although GBP/USD has gained close to 0.5% over the last three trading sessions, reflecting a period of relative strength for the British pound, today's session has started to show a more neutral tone and the bullish momentum seen earlier in the week has begun to slow.
It’s been a fast week for GBP/USD, with the pair pulling back to a major support level last Wednesday followed by a strong reversal that’s set fresh monthly highs.
Over recent trading sessions, the British pound has begun to show a notable recovery. This can be observed in the performance of GBP/USD, which has gained more than 1.3% over the last four sessions, reflecting a consistent improvement in sterling's strength against the U.S. dollar.
The pound sterling has started to show relevant strength against the U.S. dollar. At the moment, GBP/USD has gained slightly more than 1.3% in the short term, reflecting an important buying bias.
GBP/JPY has flown up to a fresh 18-year high and even with a recent bout of USD-strength, GBP/USD has held up relatively well.
The week ends with GBP/USD down around -0.6%, reflecting a clear loss of short-term momentum in the pound sterling. At the same time, the US dollar is showing renewed stability and continues to hold a stronger demand bias against its main rivals.
During today’s session, a consistent neutral bias has continued to shape GBP/USD price action in the short term, with the pair showing barely a 0.1% variation.
The British Pound has held up well, outperforming the Euro for the past two weeks. And now the dominant trends in both GBP/USD and GBP/JPY have shown pullbacks and support tests.
As the trading week progresses, GBPUSD has shown a decline of around 0.4%, with weakness in the pound and strength in the U.S. dollar.
The British Pound was flying high just a month ago on the way to fresh four-year highs but GBP/USD has funneled into a falling wedge since then with a massive test at the 1.3500 psychological level.
GBP/USD has now recorded three consecutive bearish sessions in the short term, resulting in a decline of more than 1%, reflecting a renewed and consistent selling bias in recent price action.
The FTSE 100 edged higher to close in on last week’s record, as the pound weakened following the release of UK wages and Jobs data that puts a March rate cut firmly on the table, barring any surprises in tomorrow’s inflation report. Unless we see a sharp turnaround in data, I would be expecting another rate cut in June, and possibly more in the summer if inflation risks ease. This should keep the longer term FTSE 100 forecast firmly supported and keep a lid on sterling.
Markets remain positioned for further Bank of England easing even as inflation sits above target. The next run of UK labour market and CPI figures will help determine whether that optimism is justified or prematurely priced.
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