Market Analysis: The GBP/USD Exchange Rate Falls to a Month’s Minimum

FXOpen -

Yesterday and today, the GBP/USD rate fell below 1.27 for the first time since July 6. A number of factors contributed to this:

  • rising bond yields amid downgrade of the US rating by Fitch;
  • strong data on the ADP labor market — the number of jobs in the US, excluding the agricultural sector, increased by more than 300k over the month;
  • market expectation of news from the Bank of England, which will publish its interest rate decision today at 14:00 GMT+3.

According to Reuters, forecasts for the UK economy are disappointing. Market participants expect a 14th rate hike by the Bank of England by 0.25%.

Technical analysis of the GBP/USD chart shows that:

  • summer peaks formed an important head-and-shoulders pattern;
  • the neckline, which can be drawn through the median line of the ascending channel, has already been broken after a weak rebound in the last days of July.

The pound, which looks weak against the US dollar, may be supported by:

  • encouraging words from the head of the Bank of England;
  • block of support formed in the area of 1.2600 from the low of June, the lower border of the channel and SMA (100).

Get ready for bursts of volatility in the GBP/USD market.