- GBP/USD near December 2019 levels.
- The US dollar short-lived burst after Powell’s speech.
Sterling flexed its muscles to regain the levels seen in December 2019, which is also the highest level in the last eight months. The Fed chair Jerome Powell’s Jackson Hole speech resulted in a show of strength by the dollar, only to shed them later and let bears gain the advantage to revive the medium-term sell-off.
Powell’s speech confirmed the market expectation of allowing the inflation to overshoot if required and following the average inflation targeting for the required period.
The pound also seems to be pricing in a deal between the EU and UK regarding Brexit even though the initial talks failed to generate a positive start. Both teams are now working behind the scenes without providing any sound bites to the media. A no-deal scenario could be a difficult situation for the currency.
As Monday is a bank holiday, the long weekend might prompt cutting positions by the market participants.
The traders will be watching the virtual Jackson Hole Symposium as Bank of England governor Andrew Bailey is scheduled to speak today at 14:05 UK time.
GBP/USD was trading at 1.3275 easing from the eight-month high of 1.3289 posted earlier in the day. The cable has been printing higher lows and higher highs in the last four days indicating a strong upside momentum in the pair. In the short-term, the CCI indicator is suggesting heavily overbought conditions in the pair and might be ripe for a pullback.
The recent supporting trendline at 1.3145, though broken recently – without conviction, continues to help the pair stay afloat along with the 20-day moving average at 1.3122.
