The main fundamental narrative driving the pound down against the dollar in recent months is the American economy’s relative strength while Britain continues to struggle with significantly higher inflation and overall weaker growth. Generally decent GDP and job data in the USA combined with clear progress on inflation suggest that the Fed has room to retain restrictive policy for many months; the majority of traders doesn’t expect a pivot until late in the second quarter of 2024 according to CME Fedwatch Tool.
Meanwhile the Bank of England still has more work to do to bring down inflation, with the headline figure remaining more than a percent above the bank rate and likely to go up to 7.1%. It’s critical for the BoE to balance between preventing a resurgence of inflation and avoiding a recession, so Andrew Bailey’s comments on the outlook for the economy in general as well as monetary policy specifically are very important on Thursday.
As for gold, activity has been lower since late last week as traders look ahead to the meetings of the central banks. However, cable has broken through support around $1.23 and seems likely to continue downward in the medium term. That seems to be confirmed by the death cross of the 50 SMA from Bands below the 100 and the clear break below the 200 SMA last week.
However, it’d be a challenge for a new seller to find a good entry at the moment. Assuming there are no major surprises from the Fed, the BoE or British inflation, traders looking at the medium to long term might exploit volatility to sell in higher, preferably once there’s no longer such a strong oversold signal. That said, sustained trends are historically rare for forex. It’d be possible to see a bounce from May’s low around $1.23.
Meanwhile the Bank of England still has more work to do to bring down inflation, with the headline figure remaining more than a percent above the bank rate and likely to go up to 7.1%. It’s critical for the BoE to balance between preventing a resurgence of inflation and avoiding a recession, so Andrew Bailey’s comments on the outlook for the economy in general as well as monetary policy specifically are very important on Thursday.
As for gold, activity has been lower since late last week as traders look ahead to the meetings of the central banks. However, cable has broken through support around $1.23 and seems likely to continue downward in the medium term. That seems to be confirmed by the death cross of the 50 SMA from Bands below the 100 and the clear break below the 200 SMA last week.
However, it’d be a challenge for a new seller to find a good entry at the moment. Assuming there are no major surprises from the Fed, the BoE or British inflation, traders looking at the medium to long term might exploit volatility to sell in higher, preferably once there’s no longer such a strong oversold signal. That said, sustained trends are historically rare for forex. It’d be possible to see a bounce from May’s low around $1.23.