GBPUSD under Pressure as US Treasury Yields Rise

GBPUSD started the week on a bearish note seeing a steep decline during Monday’s trading session. The pair continues to trade downtrend today as well with little change against US dollar. The fundamental pressure on Sterling stems from the US benchmark Treasury yields that rose to nearly 3%. The GBP/USD was sold off its 22-month high last week after the trinity of the most important UK macro indicators all came out below expectation and the Bank of England Governor Mark Carney remained dovish while talking to BBC about the Bank’s interest rate outlook.

GBPUSD Below 1.4

The FX market is still pricing in the possibility of the Bank of England raising the Bank rate by 25 basis point to 0.75% on May 10 when the Bank meets for the monetary policy decision and also publishes the fresh macroeconomic forecast in its Inflation Report followed by the press conference with Bank’s top officials. While many believe that the main factor to cause GBP to plummet was Carney’s BBC interview, some investors also give equal weightage to soft UK data published recently as well as the reignited concerns over Brexit may all be hampering the GBP exchange rate.

As UK’s economic growth has started to lag behind other major economies and Brexit proceedings starting to look distinctive rocky again, GBP’s recent strength is in danger of reversing sharply, particularly if Prime Minister May’s position comes under further pressure. Looking ahead the GBPUSD exchange rate may face further downtrend movement this week as the UK publishes its latest growth figures. Analysts forecast that Friday’s GDP reading will reveal that UK economic growth slowed from 0.4% to 0.3% for Q1, likely resulting in the GBP being driven even lower, especially if it seen as limiting the chances of the Bank Of England raising interest rates next month. Expected support and resistance levels are at at 1.3830 to 1.3915 and 1.3965 to 1.4040 respectively.