GBPUSD breaks range

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Thanim Islam
  • USD continues its rally
  • Interest from Xi Jinping to boost risk appetite
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USD soared to fresh highs following on from Fed Powell's comments on Sunday, as well as the better-than-expected ISM services numbers for January. The probability of a rate cut in March is now down to 0.16%, and equities tumbled as a result. Despite the better services PMI numbers from the UK, GBP struggled throughout the day, dropping in line with the broader risk-off tone in markets. GBPUSD has now dropped through key support levels, opening it up the possibility of hitting the lows last see in November. EURUSD hit the December low once again before finding support.


Market rates

*Daily move - against G10 rates at 7:30am, 06.02.24

** Indicative rates - interbank rates at 7:30am, 06.02.24

Table (68)

Data points

Table (69)


  • None today.

Our thoughts

AUD has started the day stronger, following a hawkish RBA who pushed back against market expectations of rate cuts, citing inflations risks remain and that an additional hike cannot be ruled out. GBP is attempting to recover the losses from yesterday after the British Retail Consortium reported that although retails sales slowed in January to 1.4%, the number was still higher than a fall to 1%.

For the rest of the day we have UK construction PMIs and retail sales from Europe, however it will likely be the renewed risk-on mood in markets that drives FX today, which should cause some uplift on GBPUSD and EURUSD in an attempt to recover some of the lost ground from the last two days. China President Xi Jinping is set to receive a briefing from Chinese regulators on the financial markets, which is being perceived that we may well see another round of support measures for the ailing Chinese stock market. European and US equity futures indicate a higher open, and this risk-on mood could well cause some short-term USD weakness.

Chart of the day

Yesterday marked the biggest two-day fall on GBPUSD for almost a year, following January’s solid job numbers, Fed Powell's hawkish comments on Sunday, and an upshoot on ISM services activity. The combination of the three was enough to finally break the sideways trading pattern that we have seen on the pair since mid-January. The mid-December low should support GBPUSD ahead of next week's US inflation numbers, and in light of renewed risk appetite from speculation on another round of support measures for China’s stock market. The pair has dropped 2% since the start of the year.

06022024 cotd-1
Source: Bloomberg Finance L.P.

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