GBPUSD Turns To Fed Chair Powell’s Testimony

GBPUSD should provide opportunities for traders with testimony from Federal Reserve Chair Jerome Powell on Tuesday.

GBPUSD – Weekly Chart

GBPUSD – Weekly Chart

GBPUSD has been stuck in a very tight range since the start of 2023 and trades at 1.2041. The testimony could decide if the pound sterling can hold the 1.20 round number. 

US stocks were higher on Monday as Treasury yields dropped further, ahead of Federal Reserve Chair Jerome Powell’s testimony and the NFP jobs data at the end of the week. 

The three main US stock indexes rallied on Friday to post weekly gains as yields declined from a recent peak after comments from Fed policymakers calmed fears of aggressive rate hikes. The yield on the US 10-year Treasury note slipped to 3.91%, the lowest level since March 1, while the two-year yield moved lower to 4.84% after touching a 15-year high recently. 

Fed Chairman Powell’s Testimony

Powell will testify before Congress on Tuesday and Wednesday, and investors will look for clues on monetary policy changes. The economy has posted some solid data and hot inflation numbers. 

“Investors are bracing for Powell’s comments tomorrow and I don’t think he’s going to say very much from what he has been saying all along. The Fed has been basically setting the stage for further rate hikes, perhaps beyond May and the market is well aware of that,” said Peter Cardillo, chief economist at Spartan Capital.

Chancellor Jeremy Hunt’s upcoming Spring budget statement will drive the pound sterling. According to the Resolution Foundation, a healthier outlook for the UK economy means Mr. Hunt will borrow £30bn less than the Office for Budget Responsibility’s (OBR’s) November forecast. However, the medium-term picture is less rosy. 

The budget is slated for March 15. Hunt will decide on cost-of-living support packages, public sector pay, and growth plans. The country has been seeing continued strike action as public sector workers find that their income is being eroded by inflation.

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