GBP/USD extended last Friday’s losses at the start of the new week ahead of Bank of England’s policy decision on Thursday, with investors mulling whether a rate hike will be announced at the meeting.
Meanwhile, against a basket of six major peers, the US Dollar traded in proximity to a 2 1/2-week high on Monday, since accelerating inflation in the United States added to prospects of earlier interest rate hikes by the Federal Reserve ahead of the bank’s policy decision this week.
The index of core personal consumption expenditures in the US, which is the Federal Reserve’s preferred measure of inflation, rose 4.4% last month, while boosting expectations that a rate hike may occur by June 2022 and a stimulus tapering announcement may come at the bank’s November meeting.
The latest federal funds rate futures data indicated markets were pricing a 90% chance of a rate hike by mid-2022 and another rate increase by the end of 2022.
The US dollar looked “well-positioned to build on gains through a potentially decisive week of event risk,” according to an investor note by Westpac strategists, who forecast a “brisk” $15 billion per month tapering of bond purchases and a Non-Farm Payrolls report “at least as strong as consensus.”
According to Westpac, any drop in the DXY to the mid-93 level represents a buying opportunity.
As of 9:50 GMT on Monday GBP/USD was edging down 0.16% to trade at 1.3660, after earlier touching an intraday low of 1.3643. The latter has been the Forex pair’s weakest level since October 13th (1.3576). The major currency pair appreciated 1.57% in October, while marking its best monthly performance since May.
Bond Yield Spread
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, equaled -21.15 basis points (-0.2115%) as of 9:15 GMT on Monday, down from -20.1 basis points on October 29th.
Daily Pivot Levels (traditional method of calculation)
Central Pivot – 1.3718
R1 – 1.3768
R2 – 1.3854
R3 – 1.3904
R4 – 1.3954
S1 – 1.3632
S2 – 1.3582
S3 – 1.3496
S4 – 1.3411