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MTrading Team • 2023-11-08

GBPUSD drops below 1.2300 as speeches from Fed’s Powell, BoE’s Bailey loom

GBPUSD drops below 1.2300 as speeches from Fed’s Powell, BoE’s Bailey loom

Market sentiment remains dicey as traders await the key central bankers’ speeches amid recently mixed clues. Also, a lack of confirmation on how long Israel’s ground invasion in Gaza will continue joins the foggy updates about the US-China ties to challenge the optimism.

Amid these plays, the US Dollar grinds higher to 105.65, up for the third consecutive day, while the S&P 500 Futures print mild losses and the Asia-Pacific shares edge lower. That said, the GBPUSD dropped the most among the G10 currency pairs amid the recently downbeat UK fundamentals, despite hawkish comments from the Bank of England (BoE) officials.

Elsewhere, Brent oil licks its wound at an 11-week low while WTI crude oil seesaws at the lowest level since July 21. That said, Gold price also drops for the third consecutive day whereas silver prints a three-week low.

It should be noted that the cryptocurrencies stay defensive after a recent rally as traders reassess optimistic signals about ETF options and the supply-demand matrix flashed earlier.

Following are the latest moves of the key assets:

  • Brent oil prints mild gains at the lowest level in nearly two months, up 0.40% intraday near $82.50 by the press time.
  • Gold price licks its wounds at a two-week low while flashing $1,968 by the press time, down for the third consecutive day.
  • USD Index extends the week-start recovery from a multi-week low to 105.75 as we write.
  • Wall Street closed with mild gains but the Asia-Pacific stocks traded mixed, mostly downwards. That said, equities in Europe and the UK begin the day with mixed readings.
  • BTCUSD and ETHUSD both pare recent gains around $35,300 and $1,880 as we write.
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US Dollar benefits in dicey markets

US Dollar Index (DXY) edges higher to 105.65, up for the third consecutive day, as risk aversion joins the hawkish Fed expectations ahead of Chairman Jerome Powell’s speech. The recent market dynamics have been unclear as the US tries to calm down Israel’s heavy ground operations in Gaza. However, Israel appears less inclined to stop and the same escalates global pressure on the Western leaders who once favored the fight against Hamas and hence the risk appetite remains sour, which in turn favors the US Dollar’s haven demand.

On the other hand, People's Bank of China (PBoC) Governor Pan Gongsheng said that they will keep monetary policy prudent and support stable growth for the real economy, which in turn advocates more stimulus and pushes back the risk-off mood.

On the same line, US President Joe Biden and his Chinese counterpart Xi Jinping are scheduled to hold their first face-to-face talks in a year on November, 15, per Bloomberg, which in turn suggests improvement in the Sino-American ties and can prod the US Dollar bulls.

That said, Federal Reserve Governor Michelle Bowman said on Tuesday that she expects further policy tightening will be expected. Further, Dallas Fed President Lorie K. Logan said that they will need to see tight financial conditions to bring inflation to 2%. Furthermore, Federal Reserve Governor Christopher Waller said, “What people have in mind now is for prices to return to earlier levels, and that is not going to happen.”

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

Fed’s Powell, BoE’s Bailey and nothing else…

Looking ahead, Fed Chair Powell and BoE Governor Bailey are likely to rock the markets and may entertain the traders, mostly the GBPUSD pair traders. That said, the comparatively stronger US fundamentals will allow the Cable pair to remain firmer unless Powell says something too dovish, which is less likely.

May the trading luck be with you!