GBP/USD had seen its lowest point on Monday during the Asian session, revisiting its two-year low at 1.22930. The bears found more reason to short the pair last week after the Bank of England warned about risks of economic recession if interest rates embarked rapidly. Hence, GBPUSD lost almost 2% of its value on Thursday after this announcement. The downward trend, no doubt, has continued into the new week. After the recent interest rate hike last week, the US dollar seems to trump above every other foreign currency.
Similarly, the decline in pounds is due to many other negative factors, especially the increasing concerns over Brexit. Especially given Sinn Fein’s victory in the Northern Ireland (NI) elections.
Sinn Fein’s status as the biggest party in Northern Ireland has renewed fears of Ireland’s reunification with Europe. The UK Minister Lizz Truss had warned the party to dump the Brexit deal if it didn’t change Northern Ireland’s protocol. Decisions on Brexit will be revealed this week by prime minister Boris Johnson. He will be giving a speech on Tuesday - wherein he is to deliver a lecture on the “super seven” details of Brexit Bills.
Moreover, the expectations of the release of UK Q1 GDP this week have heightened tension among investors who preferred a low-risk mood of selling off ahead of the release.
Above all, there are greater expectations that the BoE will have to pause its monetary tightening for a short period, given the rapid increase in the cost of living.
We expect the bulls to defend the pair GBPUSD, having attained its lowest support in two years at 1.22990 during the Asian session today. The next resistance to watch out for is at 1.23590.