Investors' appetite for risk amid calming fears of a further collapse of the global banking system and improving investor sentiment in global markets are factors that helped the bulls of the GBP/USD currency pair rebound to the upside, with gains that reached the resistance level of 1.2350, near its highest in two months.
Despite the recovery, there is concern that banking fear could lead to a more risk-averse attitude among lenders, adding another pressure on liquidity, just as companies struggle with higher interest rates. For the time being, concerns about the impact of banking turmoil are receding, and the Bank of England is intent on steering consumer prices lower.
For his part, British Central Bank Governor Andrew Bailey stressed in his speech in London last night that interest rates may have to rise if there are signs of continued inflationary pressure. At the moment, policymakers do not see a threat to the UK's financial stability, given that banks are resilient with strong capital positions.
The focus is on flat prices and consumers remain crowded as food inflation hits new records, according to the British Retail Consortium. “We have to be very vigilant for any signs of persistent inflationary pressures. And if it becomes clear, more monetary tightening will be required. With this in mind, the MPC's response will be firmly anchored in the emerging evidence."
Sterling made fresh gains, amid expectations that another rally seems likely in May, as fingers are likely to take the pause button off until mid-summer. With a stronger pound sterling should help lower prices, as the pound's weakness over the past year is partly behind the scorching prices, as it makes imports more expensive, but it will take time to feed off.
According to trading, the pound has risen 16% against the dollar since the disastrous mini-budget in September, but it is still 12% lower than its level in June 2021.
GBP/USD Technical Outlook:
- The recent upward rebound path of the GBP/USD currency pair pushed the technical indicators towards overbought levels, according to the performance on the daily timeframe chart below.
- I expect to consider selling the currency pair from the resistance levels of 1.2390 and 1.2480, respectively.
On the other hand, over the same period of time, the bears' move toward the support levels 1.2165 and 1.2080 will be important for the collapse of the current bullish opportunity. The pound sterling dollar will be affected today by investor sentiment in global financial markets and the announcement of net lending to individuals and British mortgage approvals.
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