The GBP/USD exchange rate crashed further into oversold territory on the charts last week, but it is still at risk of further losses that could take it back to 1.2255 or lower in the coming days.. Rising risks to Chinese economic growth are supporting the Dollar ahead of the latest US inflation report. The pound fell again against almost all G20 crosses last week. This was partly explained by a decline of about 2% in the pound-dollar exchange rate, which fell below 1.25 to enter trade in the new week above the rounded figure of 1.23. after collapsing to the 1.2260 level, the lowest in almost two years.
Last Thursday’s outspoken assessment by the Bank of England (BoE) of the difficulties likely to lie ahead in the UK economy and their binding implications for interest rate expectations were the main drivers behind the pound’s decline, although the dollar also rose.
Friday’s payrolls data showed a moderation in U.S. wage growth in a potentially dampening outcome to inflation expectations in April, while Wednesday’s Federal Reserve decision also emerged as an effect. calming on US bond yields and the dollar. However, the inflationary economic effects of the EU’s hesitant move towards a Russian oil embargo and volatility in global markets kept the dollar ahead. The US currency should benefit from growing concerns about China’s economic outlook.
It was after Chinese Premier Li Keqiang was widely reported over the weekend that he called on authorities to step up efforts to save jobs and support families as they grapple with the fallout from the measures. containment of coronaviruses in major urban centers, including Shanghai and Beijing.
The deteriorating economic backdrop and the government’s growing willingness to support Chinese growth pose a downside risk for the renminbi and an upside risk for the USD/CAD pair, which in turn indicates continued headwinds for many other currencies by against the greenback since the beginning of this week.
As a result, some analysts are of the view that “GBP/USD could remain weak this week due to dollar strength and concerns over the UK economy amid the energy price shock. bearish support for GBP/USD at 1.2112.”
International headwinds are putting further pressure on the pound-dollar exchange rate ahead of Wednesday’s release of US inflation data for April and Thursday’s release of UK first-quarter GDP figures, both of which are highlights for the week ahead for the dollar and the pound. , respectively.
According to the technical analysis of the currency pair: Bearish expectations for the price development of the GBP/USD currency pair are open as the pessimistic picture highlighted by the Bank of England recently eases. is maintained. As a result, the psychological support at 1.2000 may be a legitimate target for continued US Dollar momentum given current factors and important economic data for the currency pair this week. On the other hand, based on the performance on the daily chart, the GBP/USD pair will need at least a 500 pip bounce from the current levels to reverse the current downtrend.