GBP/USD Price Analysis – Sep 22, 2023

Daily Price Outlook

During the European trading session, the GBP/USD currency pair has failed to stop its downward rally, experiencing a 0.35% decline, placing it at 1.2250. Despite a minor bounce from the 1.2230 region, near a six-month low, the pair struggles to gain momentum. But, the persistent bearish trend suggests potential challenges for the pound against the US dollar in the near term.

Fed's Hawkish Stance and US Dollar Impact on GBP/USD

The broad-based US dollar remains near its highest level since June, propelled by the Federal Reserve's hawkish stance. However, this dollar's strength was seen as a challenging factor for the GBP/USD currency pair. However, the Fed opted to maintain rates at a 22-year peak, between 5.25% and 5.50%, as anticipated. Furthermore, they hinted at a potential rate hike by year-end due to persistent inflation.

It is worth mentioning that the Fed's 'dot-plot' indicates a benchmark rate of 5.1% next year, signaling fewer rate cuts in 2024 than previously projected. Rising US Treasury bond yields raise economic concerns, reducing appetite for riskier assets and impacting GBP/USD.

Surprise BoE Decision Adds Pressure on British Pound

Aside from that, the British Pound faced more pressure after the surprise decision by the Bank of England (BoE) to keep the benchmark interest rate steady at 5.25%. The BoE chose to keep the benchmark interest rate unchanged at 5.25%, contrary to expectations of a 0.25% increase to 5.50%. This surprising move came as inflation slowed, the UK labor market cooled, and concerns of a looming recession emerged. It marked the first time since December 2021 that the BoE didn't raise rates and even revised down its growth forecast for July-September to just 0.1% from the previous 0.4%. This unexpected pause weighed on the Pound and contributed to the GBP/USD pair losses.

GBP/USD - Technical Analysis

Yesterday, the GBP/USD pair exhibited a pronounced bearish behavior, reaching our extended target of 1.2255. Subsequently, it attempted a retest of the resistance at 1.2310, which it had previously breached. Notably, the stochastic indicator has displayed a diminishing bullish momentum, suggesting a potential push for the price to continue its primary bearish course with an upcoming target set at 1.2200.

Given this context, we anticipate a continuation of the bearish trajectory for the foreseeable future, contingent on the price remaining below 1.2310. It's essential to highlight that the EMA50 continues to bolster the current bearish trend within the discernible bearish channel on the chart. Today's anticipated trading range spans from a support level at 1.2190 to a resistance level at 1.2350.