The GBP/USD rebounded 80 points during Wednesday's Asian session but then fell back after the European market opened. The previous rise may have been due to improved risk appetite, as better-than-expected Chinese manufacturing data boosted market optimism. However, it remains to be seen whether this situation will continue and needs to be closely monitored.
Data shows that UK mortgage approvals for January continued to decline (39,600, down from 40,500 in December), marking the fifth consecutive monthly decline and the lowest data since January 2009 (excluding the Covid pandemic period). Personal mortgage net lending also dropped from £3.1 billion to £2.5 billion in January due to rising interest rates and tighter lending policies, which continue to impact consumers. Additionally, Bank of England Governor Andrew Bailey said, "I want to remind people not to think that we have done with interest rate rises or that we will inevitably need to do more", although his comments were somewhat ambiguous. He stressed the need to assess the impact of measures already implemented on the economy.
The "Windsor framework" agreement recently reached between the UK and the EU gave the pound some momentum but has been difficult to sustain. Part of the reason may be that the agreement has little impact on the UK economy and does not improve trade conditions between the UK and other regions of the EU. A recent Bank of England survey showed that Brexit is no longer the main uncertainty factor for UK businesses, with 52% of respondents seeing it as just one of many future challenges.
Later on Wednesday, we will see US ISM manufacturing PMI data, and if it exceeds the predicted 48, the US dollar index may gain some momentum. However, the author does not expect any significant impact, and Friday's ISM service sector data may provide more volatility.
On the daily time frame, the GBP/USD remains sandwiched between moving averages, with the 50-day moving average providing resistance and the 100-day and 200-day moving averages forming a golden cross to provide support. On Tuesday, the GBP/USD attempted to break through the 50-day moving average but failed, recording a shooting star, but there has been no downward follow-up yet. The GBP/USD is currently testing the top of a descending wedge but has failed to break through.
Given the nature of the current market and risk appetite, the exchange rate could easily remain range-bound in the short term and may require a catalyst to help it break through. Closing above the 1.2100 level on the daily chart may give potential longs more confidence. On the other hand, if the daily close is below the wedge or the 100 and 200-day moving averages, further pressure may be expected.
Data shows that UK mortgage approvals for January continued to decline (39,600, down from 40,500 in December), marking the fifth consecutive monthly decline and the lowest data since January 2009 (excluding the Covid pandemic period). Personal mortgage net lending also dropped from £3.1 billion to £2.5 billion in January due to rising interest rates and tighter lending policies, which continue to impact consumers. Additionally, Bank of England Governor Andrew Bailey said, "I want to remind people not to think that we have done with interest rate rises or that we will inevitably need to do more", although his comments were somewhat ambiguous. He stressed the need to assess the impact of measures already implemented on the economy.
The "Windsor framework" agreement recently reached between the UK and the EU gave the pound some momentum but has been difficult to sustain. Part of the reason may be that the agreement has little impact on the UK economy and does not improve trade conditions between the UK and other regions of the EU. A recent Bank of England survey showed that Brexit is no longer the main uncertainty factor for UK businesses, with 52% of respondents seeing it as just one of many future challenges.
Later on Wednesday, we will see US ISM manufacturing PMI data, and if it exceeds the predicted 48, the US dollar index may gain some momentum. However, the author does not expect any significant impact, and Friday's ISM service sector data may provide more volatility.
Given the nature of the current market and risk appetite, the exchange rate could easily remain range-bound in the short term and may require a catalyst to help it break through. Closing above the 1.2100 level on the daily chart may give potential longs more confidence. On the other hand, if the daily close is below the wedge or the 100 and 200-day moving averages, further pressure may be expected.