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GBP/JPY 215.359
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April 17th - Gold prices rebounded somewhat amid optimism surrounding US-Iran negotiations, but further gains may be limited until the geopolitical situation becomes clearer. Analysts at Commerzbank stated, "Gold prices also rebounded on hopes of an end to the war, as this eased concerns that central banks would have to adopt tighter monetary policies to combat higher inflation risks, thus increasing the opportunity cost of holding gold. However, as long as uncertainty remains high, the potential recovery in the gold market may be temporarily exhausted."On April 17, Hungarian Prime Minister-elect and Tissa Party leader Pieter Majol, citing the head of Hungarian Oil and Gas Company (MOL), stated that Russian oil shipments to Hungary via the "Friendship" pipeline, after months of disruption, may resume next week. Majol told reporters on Friday that the official informed him of the resumption of oil shipments and that he would be visiting Russia next week to discuss oil supply issues. Majol said, "Simply restarting the pipeline is not enough; it also requires oil shipments." This pipeline, which carries Russian oil through Ukraine to Central Europe, has been out of service since being damaged in a Russian drone attack in January.On April 17th, Goldman Sachs Head of Asset Allocation Research, Mueller Grissmann, stated that the recent stock market rally needs the Federal Reserve to resume interest rate cuts to maintain its momentum. He described the recent stock market rebound as a "rapid and intense recovery phase," driven in part by technical factors, including hedge funds that had previously sold off stocks to reduce risk and are now forced to rebuild their positions. While the S&P 500 is on track for a third consecutive week of gains exceeding 3%, he questioned whether the rally could be sustained without monetary policy support. He noted that the stock market rally coincided with high oil prices and a lagging credit market. The stock markets strong performance is partly due to its high exposure to technology stocks.The Kremlin warned that Europes provision of drones to Ukraine is dragging Europe toward war with Russia, and that these countries involvement in the war is escalating.On April 17th, Ebury strategist Matthew Ryan stated in a report that the pound would face downside risk if the ruling Labour Party performs poorly in the May local elections. He said this would further increase pressure on Prime Minister Starmers position, and the pound would be under pressure if the market anticipates that his potential successor will lead to greater spending and debt. Starmers fate has been questioned after media reports that former US Ambassador Peter Mandelson failed a security vetting process but was still approved for the position. Ryan stated that the betting market now considers the possibility of Starmer leaving before the end of June to be a real possibility.

Despite the Bank of England's less hawkish forecasts, GBP/USD is expected to rise beyond 1.2170

Daniel Rogers

Aug 04, 2022 11:52

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The GBP/USD pair has showed a modest retreat after failing to reclaim the 1.2170 resistance level. As the US dollar index (DXY) is projected to extend losses below 106.30, the upside stays favored. After a good fall to the round-number support around 1.2100, the asset has resumed its general uptrend.

 

As investors await the Bank of England's monetary policy decision, the cable might exhibit some volatility in the near future (BOE). In consideration of market expectations, BOE Governor Andrew Bailey will raise interest rates to 1.75 percent as a second successive 50 basis point (bps) increase is anticipated.

 

No one could dispute the reality that households in the United Kingdom are suffering tremendous pricing pressures. The inflation rate has risen to 9.4 percent, and there have been no indicators of a peak as of yet. The rate of inflation might reach double digits if the rate of price growth continues to accelerate, and families will be forced to pay more for identical quantities.

 

Well, a 50 basis point rate boost is insufficient to battle the inflation monster. However, dismal growth estimates and a decrease in the Labor Cost Index prevent the BOE from sounding excessively hawkish.

 

On the dollar front, the US dollar index (DXY) is experiencing uncertain movement as the visit to Taiwan by US House Speaker Nancy Pelosi has exacerbated protracted Sino-US tensions. The United States has held the global leadership position for a considerable amount of time, and China is keen to take over. Therefore, the United States' backing for Taiwan, a country with enormous technical potential, has exacerbated tensions between the United States and China.


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