The British Pound is the Weakest Currency in July Thus Far
Support at the psychological 1.2500 handle failed to hold GBP/USD higher in the early week as the pair was last seen trading at 1.2464.
Much of the decline is attributed to a stronger dollar, although Sterling weakness has also been a significant factor. For the month thus far, the British pound is the weakest among the major currencies. It is down nearly one and a half percent against the greenback.
Sterling is also the second weakest currency for the week thus far, falling behind the Australian dollar on the decliners list.
Fed Communication to Drive the Dollar
The greenback has been on a tear as of late as investors readjust expectations for US monetary policy easing.
Several Fed members are speaking today which stands to impact the dollar, and as a result, the majors. Fed members Bullard and Chair Powell are both delivering speeches today. Fed member Quarles is also on the docket, but his speech seems the least likely to move the markets.
The biggest driver this week is probably going to be Fed Chair Powell’s testimony to the Senate Banking Committee. The testimony will take place over Wednesday and Thursday. It is very likely that discussions of monetary policy will impact the dollar pairs.
If it weren’t for a large spike lower near the start of the year, GBP/USD would be trading at two-year lows. The pair has essentially been in a free fall for the last seven sessions.
I think it is possible that the pair tests the early year spike low at 1.2373. The level I was watching yesterday was 1.2486. It held the pair higher on a daily basis in 2018. The level did trigger some buying on Friday but since the pair has now fallen through it, I expect it will act as resistance in the session ahead.
- The British pound is especially weak among the majors.
- Major support at 1.2486 broke today, it is now resistance.
- Communication from Fed members over the next three days can drive unusual volatility to the markets.